Homeowners are being forced to accept lower offers because of high mortgage rates.
According to research, 42% of respondents are willing to accept price reductions of at least 5%, which is a five-year high.
According to Zoopla, more sellers are being compelled to accept lower offers in order to sell their properties due to rising mortgage rates and the cost of living problem.
According to the most recent house price index published by the real estate website, 42% of sellers were agreeing to 5% or more price reductions from their home’s asking price in the week ending June 18 — the highest percentage since 2018. This is a result of buyers becoming more demanding.
In the same time frame, 15% of people who were seeking to sell their homes accepted price reductions of more than 10% from the original asking price. Because of rising mortgage rates and the current affordability problem, buyers are pressing for cheaper pricing.
The average cost of two- and five-year fixed-rate mortgages has risen to its highest level in seven months, adding to the strain on borrowers nearing the end of their contracts and on those looking to purchase a new house by reducing their purchasing power.
According to the most recent information from the financial information company Moneyfacts, the average rate for a two-year fixed home mortgage was 6.26% on Tuesday, up from 6.23% on Monday. The typical five-year fixed residential mortgage rate increased from 5.86% the day before to 5.87% today.
Following the Bank of England’s half-point hike in interest rates to 5% in June in an effort to control inflation, mortgage rates have continued to rise.
According to Zoopla, rising rates would have a 10–20% negative impact on buying power, which is the amount of money a buyer may borrow to buy a property, compared to when rates were at 4%.
According to Richard Donnell, executive director at Zoopla, “Demand for homes remains, but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”
Purchasers might try to lessen the effects of rising mortgage rates and monthly repayments by either putting down a larger down payment or accepting longer mortgage terms. All prospective purchasers, however, may not have such options, and as mortgage rates continue to increase above 5%, more buyers are priced out of the market.
This trend has so far been supported by the data, which shows that there have been 14% fewer purchasers in the market over the last four weeks than there were a year ago.
In the meantime, the annual growth rate of home prices fell to 1.2% in June, and Zoopla forecasted a return to “modest” quarterly home price declines in the second half of 2023.
By the end of the year, the average UK house price is expected to decline by up to 5%, though the amount will also depend on future inflation and mortgage rates.
There are indications that supply is beginning to develop more quickly, which would likely have an adverse effect on the expansion of property prices. Comparing the last four weeks to the five-year average, there were 18% more residences posted for sale.
A rise in supply would increase the options available to purchasers and allow them more wiggle room in negotiations, resulting in greater drops in home prices.