UK annual house price growth slowed to 0.1% this month, the lowest rate for 11 years as high mortgage rates bite into the industry, data from Zoopla shows.
House transactions are on track for one million completions this year, 21% lower than 12 months ago and the lowest since 2012, says the property group’s August House Price Index. This month’s growth is 0.5% lower than July.
This is equivalent to the average household moving just once every 23 years — an increase of six years since 2021, the report points out.
It adds that while sales from cash buyers are projected to slip by just 1% this year compared to 2022, mortgaged sales are forecast to slump by 28% over the same period.
“The biggest driver of this drop in sales is a direct result of higher mortgage rates,” the study says. About one-third of all house sales use a home loan.
The report adds: “Mortgage rates have been falling in recent weeks albeit slowly and they remain over 5%.
“Mortgage rates need to fall below 5% to improve affordability and stimulate more home moves.”
The average two-year fixed residential mortgage rate today fell a single basis point to 6.72% from yesterday, according to Moneyfacts. While the average five-year fixed residential mortgage rate is unchanged at 6.21%.
The study points out that house prices and the cost of mortgage repayments remain high.
Average asking prices fell by 1.9% to £364,895, according to Rightmove’s latest housing price index last week.
However, average prices are still £59,000, or 19%, higher than in the pre-pandemic market of August 2019.
Zoopla adds that higher mortgage rates over the last year have lifted average mortgage repayments by 23%, or £216, per month on a home with a 75% loan-to-value mortgage over a 25-year term.
It says that although average wages have risen by 7% over the last year, against inflation at 6.8% in the year to July, housing affordability remains a problem for prospective buyers.
Zoopla executive director Richard Donnell says: “House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates.
“While UK house prices are 0.1% higher over the year, it is the number of sales that have been hit hardest by higher borrowing costs, especially among mortgage reliant buyers.
“Mortgage rates have started to fall slowly but rates need to fall below 5% before we see an increased appetite to move home in the second half of 2023.”
Primis Mortgage Network proposition director Vikki Jefferies adds: “After record house prices in the aftermath of the pandemic, we are now seeing a relative correction and not the beginning of a crash.
“In fact, house prices are still going up, albeit at a slower rate, and remain well above pre-pandemic levels.
“However, with mortgage rates above mini-budget peaks, and further base rate rises expected in the coming months, affordability will continue to be an obstacle for those looking to buy a home.
“Navigating the market in these conditions is more complicated than in the low-rate environment consumers had become accustomed to. As a result, advisers will have to adapt in order to support customers in the best way possible.”
