Homes harder to sell as high mortgage rates frustrate buyers

Image source, Getty ImagesByKevin PeacheyCost of living correspondentPublished5 minutes agoThree in five homes listed for sale since January remain on the market, according to property portal Zoopla, as high mortgage rates frustrate potential buyers.A lack of demand from buyers, as well as some high asking prices from sellers, have left homes in some areas unsold.Agreed sales were 7% below last year, Zoopla said, but the picture varied across the country with sales down 12% in Wales and 11% in the East Midlands.First-time buyers were most exposed to high mortgage rates, although there are now signs of greater competition among lenders who are lowering rates.A jump in mortgage rates in April - prompted by financial upheaval caused by the US-Israeli war with Iran - added an average of £125 a month to a typical mortgage at its peak compared with January.In London, the peak saw £232 a month added to the average first-time buyer's costs. The average two-year fixed rate jumped from 4.83% at the start of March to a peak of 5.90% on 12 April, according to the financial information service Moneyfacts. It has since dropped to 5.54%.The increase was a major factor in pushing down demand from buyers in the UK by 15% compared with a year earlier, according to Zoopla's report which considers the market to the end of May.However, in the north east of England mortgage costs for first-time buyers were only £66 a month higher over the same period."The national picture can only tell you so much," said Richard Donnell, executive director at Zoopla."For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting."However, he pointed out that recent cuts in mortgage rates were a positive for buyers."For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate. If you are ready to move, conditions are more favourable than they were three months ago," he said. How much could my mortgage payments change? At this rate, your payments could change by… monthly change to monthly total This calculator does not constitute financial advice. It is based on a standard mortgage repayment formula dependent on the mortgage size and length and a fixed interest rate. It should be used as a guide only and does not represent the suitability, eligibility or availability of mortgage offers for users. For exact figures, users will need to approach an official mortgage lender. Interest rates fluctuate based on the Bank of England's base rate and market conditions The Bank of England said mortgage approvals for house purchases fell to a two-and-a-half year low in May, as deals were pulled from sale and rates rose.The drop in demand from first-time buyers, who are most exposed to higher borrowing costs, had an impact on the type of homes that remain unsold.Zoopla said that two-thirds of one and two-bedroom flats listed this year were unsold.However, there was little change in the pace at which two and three-bedroom homes were selling. Agreed sales had also fallen at a much lower level in northern England and in Scotland, where there were fewer homes for sale and the cash increase in mortgage costs was smaller, Zoopla said.Estate agents said homes for sale exceeded demand across various price ranges.Uncertainty had been created by the financial impact of the Iran war, as well as changing political leadership in the UK."Sales are taking much longer and it is proving increasingly difficult to generate commitment," said Jeremy Leaf, a estate agent in north London."However, the overwhelming majority of sales which have been agreed are proceeding, although inevitably more slowly."Related topicsPersonal financeMoneyHousing marketUK economyCost of Living Mortgages