A smoother transition to higher mortgage rates over the last year could have left the housing market in a better place. Instead, buyers and sellers have been wrestling with fluctuating rates, which has increased uncertainty in the market.
Many potential movers have opted to stay put and wait for clarity. And in early July, when mortgage rates surpassed mini-budget highs, the decision to stick or twist was made tougher than ever. This surge in borrowing costs acted as a wake-up call for sellers who had been lingering on the market, leading to a record share of them lowering their asking price expectations.
Price Reductions
Half of homes in England & Wales that sold in July had undergone a +£1 price reduction. This figure was the highest since our records began in 2016 and rose from 47% in June. It took 73 days for the average seller to reduce their home last month, 17 days longer than in June. This indicates that the spike in mortgage rates at the beginning of the month acted as a catalyst for reducing seller expectations of their home’s value, many of whom had previously been holding firm.
While sellers of high-end homes remain most likely to sell after a price reduction, the increase has predominantly come from households selling more affordable properties. The proportion of homes that sold for less than £250k following a price reduction rose 18% year-on-year. These sales are more likely to be needs based and indicate where higher mortgage rates have hit hardest. Meanwhile the share of +£1m sellers cutting their price only rose 7% year-on-year, with an abundance of cash insulating this end of the market.
Homes selling below their asking price
With higher rates reducing what most mortgaged buyers can afford, 54% of homes sold below their asking price across England and Wales in July, the highest share since December 2022. On average, buyers of these homes negotiated a 4.5% discount, unchanged from last month. However, as more sellers adjust their prices to reflect economic realities, the share of homes selling with a +10% discount remained unchanged at 4%.
Larger homes, that have typically seen the strongest price growth over the last few years, are most likely to sell for under their asking price. 67% of 4bed+ homes sold for less than their final asking price in July, up 21% year-on-year. Meanwhile higher mortgage rates have elevated demand for smaller homes from first-time buyers, stalled would-be second steppers and downsizers looking to cash in and become mortgage-free. 51% of one beds sold below their asking price last month, up 6% year-on-year.
Despite these shifts, the average seller in England & Wales achieved 98.6% of their final asking price in July. While down from a peak of 101.2% in April last year, sellers continue to achieve closer to their asking price than they did pre-Covid. In July 2019 for example, the average seller sold their home for 98.0% of their final asking price. This reflects that new buyer registrations continue to broadly track 2019 levels. However, the number of new homes coming onto the market has fallen back below 2019.
Days to sell
It took the average seller in Great Britain 49 days on average to accept an offer on their home last month, making it the slowest July to sell since 2013.
While more expensive homes have always been slower to sell, much of the increase has been driven by the top end of the market where sellers are more happy to hold out. The average +£1m home went under offer last month in 76 days, 33 days longer than the same time last year. Meanwhile homes costing less than £250k agreed a sale in 47 days in July, marking a 15-day year-on-year increase.
What next?
More recently, the improved inflationary outlook has brought about a wave of rate cuts from lenders. This should ease mortgaged buyers’ stretched affordability and wider confidence in the economy. However, the growing expectation that rates will stay higher for longer will be a tough pill for heavily mortgaged households to swallow. Although those who have fixed rate deals coming to an end in the year ahead may have missed peak mortgage rates and have the luxury of time to plan.
