UK house prices will fall by 5 percent this year as buyers have been hit by higher mortgage rates and rising living costs, a real estate portal has reported.
While the spring sales showed strong activity, the portal cited higher mortgage rates and rising living costs as factors in driving prices down in the future.
The stubborn inflation rate, currently at 8.7 percent, is one of the key issues the current government faces. Under Prime Minister Rishi Sunak’s leadership, the government has been vocal about halving the inflation rate and providing financial support to struggling British families.
Zoopla reported that buying power will be affected by the recently raised Bank Rate of 5 percent, driving mortgage payments up.
Mortgage rates, sitting between 5 and 6 percent, are expected to drive sales down. If the rate goes back to 4 to 5 percent, house prices would change by plus/minus 2 percent over the course of the year, the research showed.
The report showed 18 percent more homes were on sale in the last month than on average over the last five years, comprising the highest stock level since before the COVID-19 pandemic. Zoopla attributed the rise in supply to buyers having more choice and less competition.
“Sellers are agreeing sales at 3.8 percent below asking price on average, while 4 in 10 sellers are accepting offers of more than 5 percent below their asking price,” records showed.
Zoopla predicted that UK areas with the highest house prices, such as east of England, southwest, east midlands and southeast, are more likely to see price drops this year.
Meanwhile, rural areas to the east of Glasgow were estimated to have the cheapest house prices in the UK, averaging less than £112,000.
“The modest pricing of properties in Scotland along with stronger relative earnings make a home move more accessible for many,” said Zoopla researcher Izabella Lubowiecka.
Mortgage Charter
On Monday, the government published the voluntary Mortgage Charter, which sets out how lenders will support customers via temporary payment deferrals and extending mortgage terms.The charter, signed by the Financial Conduct Authority (FCA), UK Finance, the Building Societies’ Association, and others covers 85 percent of the UK market. The charter signatories have agreed that from June 26 a borrower won’t be forced to leave their home in less than a year from the first missed payment.
Starting July 10, mortgage payers approaching the end of a fixed-rate contract will be able to lock in a deal up to six months ahead.
The Labour Party has been highly critical of the Tories’ economic policies, accusing the ruling party of “crashing the economy.” Labour leader Sir Keir Starmer has addressed the increased interest rate and its impact on households.
“I know that families across the country will be worrying about today’s interest rate rise. After 13 years of Tory economic failure, people will be asking themselves how they'll afford another rise in mortgage costs.
“While Rishi Sunak and [Chancellor] Jeremy Hunt sit idle, Labour has a five-point plan to support people with mortgages and our Renters’ Charter would provide security to people who rent. We will build a stronger, more secure economy and a better Britain for everyone,” Starmer said on Twitter.
Speaking to Parliament this week, Hunt acknowledged that “higher inflation and interest rates cause anxiety and concern for many families.”
He told MPs that the government is “supporting families with one of the largest support packages in Europe, worth £94 billion, or £3,300 per household on average.”
