Exodus of first-time buyers puts brakes on UK housing market

Hike in mortgage costs after mini-budget cuts 20% off buyer demand in October

First-time buyers pulled back most from purchasing a home after the increase in mortgage costs following the mini-budget, according to a report showing a widespread slowdown in the property market.

Figures from the property platform Rightmove show buyer demand fell 20% in October compared with a year ago, as house-hunters put their property searches on hold in response to soaring borrowing costs and rising economic uncertainty.

Interest rates shot up last month after Liz Truss’s mini-budget, adding hundreds of pounds to mortgage payments. About a year ago the average new two-year fixed rate was priced at 2.25%, but in recent weeks new rates have leapt above 6%.

Rightmove’s monthly house price index showed first-time buyers were the most hesitant, with demand down 26% in October. Demand from “second steppers” hoping to move from their first home was down 17%, while interest among those at the top of the property ladder was down 15%.

Research from the Royal Institution of Chartered Surveyors published last week revealed that new buyer inquiries fell for the sixth month in a row in October, and survey feedback on buyer demand was negative across the UK. It now takes 18 weeks on average to sell a property, up from 16 weeks typically a year ago.

However, despite the drop in comparison with last year’s figure, Rightmove said buyer demand was still up 4% on 2019’s pre-pandemic levels.

Tim Bannister, Rightmove’s director of property science, said: “Though many are getting on with moves, especially those with a purchase already agreed, understandably there are people who are pausing for thought.

“There’s a group who are ready and able to move and are waiting on the sidelines for more financial certainty. Then there’s a group of first-time buyers or people hoping to trade up who were already stretching themselves financially and may now have had their plans dashed.”

A slowdown in market activity has led more sellers to reduce their asking prices in attempts to agree quicker sales. In October, 8% of unsold properties on Rightmove were reduced, double the 4% recorded in the same month of 2021.

However, it is only a slight increase on the 7.5% of unsold properties reduced in October 2019.

“The era of historically low interest rates and the buying frenzy are over, which could make way for a more normal market that opens up potential opportunities for those who were put off entering the frantic market over the past two years,” Bannister said.

Contributor

Jess Clark

The GuardianTramp

Related Content

Article image
Bank of England interest rate rise – what it means for borrowers and savers
Rate rise to 3.5% affects everything from mortgages to credit cards, loans and savings. Here is all you need to know

Rupert Jones

15, Dec, 2022 @1:27 PM

Article image
Why UK house prices could plunge by 20% after the latest interest rate hike
Property market has defied gravity for years but analysts say rising mortgage rates will mirror the 1980s price crash

Larry Elliott Economics editor

28, Jan, 2023 @8:00 AM

Article image
Shares in big UK estate agent chain fall as housing market cools
Housebuilders also see share price falls as interest rate rises and cost of living crisis deter potential buyers

Joanna Partridge

25, Nov, 2022 @3:56 PM

Article image
UK house prices: Halifax and Barratt warn of challenges ahead
Average price of home rises to £294,260 in August as cost of living crisis and interest rates hit home

Joanna Partridge

07, Sep, 2022 @1:30 PM

Article image
Six factors influencing the UK property market in 2018
It could be a better year in Britain’s dysfunctional housing market for first-time buyers and tenants

Patrick Collinson

26, Dec, 2017 @1:34 PM

Article image
Policymakers right to be worried as UK housing boom shows no sign of waning | Larry Elliott
But situation needs looking at in global context because it is not a story of British exceptionalism

Larry Elliott

17, Apr, 2022 @10:06 AM

Article image
UK’s 13-year housing market boom to end in 2023, surveyors predict
RICS report says rise in repossessions will add to supply while soaring interest rates price buyers out of market

Mark Sweney

12, Oct, 2022 @11:01 PM

Article image
Barratt brings in hiring freeze as UK housing market slows down
Housebuilder also cuts land purchases, with it forced to scrap proposals for 3,293 plots

Kalyeena Makortoff

11, Jan, 2023 @8:45 AM

Article image
House prices rise 5% a year in more bad news for would-be buyers
Figure is twice that of pay settlements across the country and comes amid a rise in inflation

Patrick Collinson

17, Oct, 2017 @10:40 AM

Article image
Let’s not pretend the mini-budget is the sole cause of falling house prices | Nils Pratley
Script was set when interest rates started rising 11 months ago and slump has some way to go

Nils Pratley

01, Dec, 2022 @6:42 PM