UK house asking prices weaken as mortgage increases dent confidence

Asking prices for UK homes flatlined in the past month as a “disorderly” mortgage market and rising borrowing costs dented confidence in the property sales. 

New sellers listed their homes for £372,812 on average in the four weeks to June 10, £82 less than in the previous month, representing a marginal fallback after five months of growth, according to data from property website Rightmove. 

Asking prices, a leading indicator of sellers’ and agents’ confidence in the housing market, had been rising since the beginning of the year as the property sector recovered from the market turmoil unleashed by autumn’s tax-cutting “mini” Budget. 

The housing market has suffered a new setback in recent weeks as lenders rushed to raise mortgage rates. Borrowing costs have increased after higher than anticipated inflation data late last month revised expectations of how long the Bank of England will have to keep raising interest rates. 

“Average new seller asking prices . . . have dropped slightly this month, signalling that the belated spring price bounce has quickly turned into an earlier than usual summer slowdown,” said Tim Bannister, director at Rightmove.

Rightmove said the number of new sales agreed had dropped “marginally” in the weeks since the unwelcome inflation data was released, while demand from new buyers registering their interest on the platform was unchanged. Consumer price inflation stood above forecast at 8.7 per cent in April.

Lucian Cook, head of UK residential research at estate agents Savills, said the figures were still “surprisingly robust”, noting that while confidence in the housing market had been improving, buyers would likely be more cautious in the face of uncertain interest rates. 

“You are probably going to have a more W-shaped recovery in the housing market,” he said.

The average two-year fixed mortgage rate moved towards 6 per cent in the past week, up from 5.26 per cent at the beginning of May, according to finance site Moneyfacts. Major lenders including HSBC, NatWest and Nationwide have had to swiftly reprice or pull deals from the market as borrowers rush to secure their rates. 

Rightmove said the “disorderly” mortgage market had prompted customers to check their mortgage affordability on its website, with visits up 53 per cent since the end of May.

UK house prices have fallen 4 per cent from their peak in August, according to Nationwide. The mortgage lender reported prices fell 3.4 per cent in May, compared to the year before, the largest annual drop since 2009. 

Analysts forecast prices could fall as much as 10 per cent in total in the next two years, particularly if stubbornly high inflation continues to force up borrowing costs. 

Property analysts are looking ahead to the next UK inflation report and Bank of England rates decision, due this week. “We expect that there may be more change to come . . . It is likely to feel very frenetic for those taking out a mortgage right now,” Bannister said.