Rate rises quash spring price bounce but activity holds up

  • Average new seller asking prices fall by £82 (-0.0%) this month to £372,812, the first monthly drop in asking prices this year and the first drop seen in the month of June since 2017:
    • The delayed spring bounce in May has quickly turned into an earlier than usual summer price slowdown
    • Asking prices set to fall in most months for the rest of the year in line with the usual seasonal pattern, and Rightmove still predicts an overall 2% annual drop in new seller average asking prices by the end of 2023
  • Despite some significant increases in mortgage interest rates over the last few weeks, Rightmove’s statistics currently show no effect on buyer demand but a slight impact on sales activity:
    • Buyer demand over the last two weeks is 6% higher than the same period in 2019’s more normal market
    • The number of sales being agreed has dropped marginally, and in the last two weeks is 6% behind the same period in 2019 compared to being 3% behind in May
  • The disorderly mortgage market is creating uncertainty among movers with more change expected this week:
    • More prospective buyers are checking their latest affordability, with daily visits to Rightmove’s Mortgage in Principle service jumping by 53% since the unexpectedly high inflation figures
    • Ahead of this week’s inflation figures and Bank of England Base Rate decision, the average rate for a 5-year fixed 85% Loan-to-Value mortgage at the time of writing is 5.20%, up from 4.56% four weeks ago

Average new seller asking prices fall by £82 (-0.0%) this month to £372,812. This is the first monthly drop in new asking prices this year, and the first at this time of year since 2017. On average over the previous ten years we have seen an increase of 0.6% in asking prices at this time of year, indicating that buyer affordability constraints and more pricing realism from new sellers have brought forward the usual summer slowdown. There have been some significant increases in fixed mortgage interest rates over the last few weeks following stubbornly high inflation figures, piling pressure onto already very stretched budgets. These increases in rates and monthly mortgage payments may mean that some have to pause their plans for now. However, Rightmove’s latest snapshot of the market suggests the immediate impact on activity has been limited with most movers determined to carry on if they can still afford it.

“Average new seller asking prices, the first and leading indicator of new trends in the market, have dropped slightly this month, signalling that the belated spring price bounce has quickly turned into an earlier than usual summer slowdown. We expect asking prices to edge down during the second half of the year which is the normal seasonal pattern, and while we sometimes re-forecast our expectations for annual price changes at this time, current trends suggest that our original forecast of a 2% annual drop in asking prices at the end of 2023 is still valid. Agents report that new sellers are sitting in two camps – those who still have overoptimistic price expectations following the buoyant pandemic market, and those who have adapted to the new conditions and are coming to market with a competitive price. Sellers who price competitively are much more likely to find a suitable buyer quickly before their home appears stale, and they can often then negotiate on price on any onward purchase.”

Tim Bannister Rightmove’s Director of Property Science

Over the last two weeks, Rightmove’s statistics show no effect on demand but a modest impact on sales activity as movers navigate the latest mortgage rate rises. The number of buyers enquiring to agents about properties for sale is still 6% higher than the same two weeks in the more normal market of 2019, while the number of sales agreed during this period is 6% lower, a slight drop from agreed sales figures being 3% behind 2019’s levels in May. However, it remains to be seen whether the expected further increase in interest rates will impact these figures further.

However, just as rates appeared to be settling, the significant changes in the mortgage market over the last four weeks are creating renewed disruption and uncertainty among movers trying to calculate how much they can afford to borrow and repay. In the last four weeks, the average mortgage rate for a 5-year fixed 85% Loan-To-Value (LTV) mortgage has jumped from 4.56% to 5.20%. This means that a new buyer purchasing a property at the current average asking price would now expect to pay an extra £117 per month if repaying the mortgage over a 25-year term.

By comparison, the average rate for the same mortgage product changed from 4.50% to 4.52% over the previous four weeks, highlighting how quickly the mortgage market has become more uncertain. This is leading more prospective buyers to check their current affordability, with daily visits to Rightmove’s Mortgage in Principle service up by 53% compared with before the unexpectedly high inflation figures.

“We expected some more twists and turns this year and we’ve had several in the last month, including stubbornly high inflation figures, surprisingly large average wage increases, and their eventual impact on mortgage interest rates and availability. We expect that there may be more change to come depending on this week’s inflation figures and the Bank of England Base Rate decision. It is likely to feel very frenetic for those taking out a mortgage right now, as they try to quickly lock in the best rate that they can find. Although the impact of higher mortgage rates on activity levels has been limited so far, with prospective buyers who can still afford to move appearing determined to go ahead, it remains to be seen how movers will respond to the expected further rate rises.”

Tim Bannister Rightmove’s Director of Property Science

Agents’ views

“The number of buyers has remained steady despite some of the challenges currently facing the market, though sales activity has dropped slightly. Sensibly priced properties are still selling well, but we’re now returning to more normal market conditions where homes are taking longer to sell, and buyers have the time and space to come back for a second viewing. We anticipate some more hurdles to overcome in the second half of the year, but it is not all doom and gloom – we’re working with lots of people who are motivated to move and sellers who are pricing right are still seeing a lot of success.”

Michelle Gallagher, Sales Director at JDG in Lancaster

“Although there has been some recent turbulence, I’d still class what we are seeing in the market at the moment as more normal levels of activity after the pandemic. We’re going through a period of transition, and some discretionary sellers in no immediate rush to move are still testing the market with a price as there is a healthy level of buyer activity. However, sellers who are motivated to agree a sale soon need be sensible and market their property in line with their local market conditions. While there is now more choice on the market, we still have more buyers than homes for sale, and the stand-out properties are still attracting a queue of people wanting a viewing.”

Andrew Fenton, Managing Director at Chris Davies Estate Agents in Rhoose

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