Homebuyer demand falls 15% after mini-Budget, says Rightmove

Demand to buy new homes has fallen 15 percent in the past two weeks, according to Rightmove, in the wake of the mini-budget that rocked the UK economy.

The property portal said that while buyer demand was still 20 percent higher than the same period in 2019, it had fallen 15 percent compared to the same two weeks in 2021.

Despite this, home sellers continued to raise sales prices during the month to hit a new record high of £371,158.

Falling demand: The number of buyers looking for a new home fell 15% in October, according to real estate website Rightmove

Price decline: First-time buyer and 'second-mover' homes saw their sales prices drop marginally, according to Rightmove

Price decline: First-time buyer and ‘second-mover’ homes saw their sales prices drop marginally, according to Rightmove

Looking at typical sales prices, Rightmove said the average UK house gained 0.9 per cent or £3,998 in the last month. This was less than the five-year average for October of 1.2 percent.

Year-over-year, prices rose 7.8 percent, up from 8.7 percent in September.

First-time homebuyers seem to bear the brunt of the economic turmoil sparked by the government announcement, which has sent mortgage rates soaring.

Among first-time buyers, home-buying demand fell 21 percent compared to 2021.

First-time homebuyers typically have the tightest budgets of all homebuyers, having no equity from an existing property to draw on, plus paying the highest mortgage rates.

“The rapid rise in average mortgage interest rates has understandably caused some would-be movers to put their plans on hold and wait to see how the coming weeks and months unfold,” the report said.

Mortgage rates had risen steadily in recent months as the Bank of England raised its base rate in a bid to combat rising inflation.

However, the unfunded tax cuts announced in the mini-budget and the resulting market reaction led to a more pronounced increase.

This came as yields on gilts, as UK government bonds are known, rose as investors demanded higher rates to lend and buy British debt.

This influences the price of mortgages and, combined with expectations that the Bank of England would have to raise interest rates further, the scenario led to mortgages being withdrawn and revalued, with increased costs.

Counting the cost: First-time homebuyers have seen a typical increase in mortgage payments since 2021

Counting the cost: First-time homebuyers have seen a typical increase in mortgage payments since 2021

According to figures produced by Defaqto financial analysts for This is Money, the cheapest interest rate available on a £150,000 two-year fixed mortgage for the purchase of a house with a 25 per cent deposit on October 18, 2021 was 1.19 percent.

Before the mini-budget of September 22, 2022 it had risen to 4.06%, but as of October 14 it was 5.69%.

In real terms, this would mean that the monthly mortgage payment would have increased by £363 in one year.

Prospective buyers and those remortgaging can see the latest rates available to them using the This is Money and L&C Mortgage Calculator.

Despite the broader uncertainty, most property sales and purchases that were agreed to before the mini-budget on September 23 are still going ahead, Rightmove said.

Just 3.1 percent of agreed sales have fallen in the two weeks after the mini-quote, in line with the 3 percent figure for the same two weeks in 2019.

A new sales price record may seem surprising given the market uncertainty that followed the government’s mini-budget at the end of September, but it will take time for any impact to sink in.

Mortgage brokers and agents have reported that homebuyers are rushing to complete their fixed-rate mortgage offers, which reflect the lowest rates on the market before September 23, before they expire.

Rightmove said there were signs that prices were starting to come down in some areas of the country and on certain types of properties.

The median price of a ‘second step’ home, which refers to those not buying their first or what will likely be their last home, fell 0.2 percent in the past month, and the typical home in the North West England saw its value decline by 0.6 percent.

Sales prices: increased by 0.9% in October, compared to 0.7% in September

Sales prices: increased by 0.9% in October, compared to 0.7% in September

Rightmove said: “A new sales price record may seem surprising given the market uncertainty that followed the government’s mini-budget at the end of September, but it will take time for any shock to filter through to house prices.”

Rightmove also said there was little evidence of home sellers lowering the sales price of their properties. The number of households that experienced a reduction in the last month increased between 2% and 23%. The five-year average before the pandemic was 32 percent.

The real estate portal concluded that while sales prices were likely to drop in November and December, this was in line with normal seasonal price fluctuations. He said it was too soon to make a prediction about where sales prices would be in 2023.

Region by region: Property sales prices continued to rise in some areas of the UK while falling in others

Region by region: Property sales prices continued to rise in some areas of the UK while falling in others

Tim Bannister, Rightmove’s director of property science, said: ‘The vast majority of buyers who have already agreed to buy are still going ahead.

‘Some would-be first-time homebuyers will have had their plans thwarted by the sudden nature of the mortgage rate increases, and now face a difficult situation with rents also rising and a shortage of available rental housing.

“It’s understandable that some new movers who have the option of waiting want a clearer vision than they have now before proceeding with a major purchase, such as a home.

‘With uncertainty about where mortgage interest rates will go, those who can still afford to continue may decide that waiting too long could cost even more than taking action to move now, especially if the level of demand continues to outpace supply and supports prices.’

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..

Banks and building societies continue to lend and mortgages are still being offered and applications accepted.

However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.

This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property

What if I need to re-mortgage?

Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.

Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.

Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.

What if I am buying a house?

Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.

How to Compare Mortgage Costs

The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.

You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.

Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .

> Consult the best fixed-rate mortgages that you could apply for

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