According to Zoopla, mortgage rates were set to rise to between four and five per cent before the mini Budget in 2022, and this along with the cost of living, had weakened demand in the summer months.
However, the mini Budget added one per cent to mortgage rates so they hit six per cent, inflicting a 25 to 30 per cent hit on the buying power of movers. This along with mortgage products being pulled has led to a drop-off in activity.
Zoopla said homeowners were continuing to express an interest, but heightened uncertainty had dissuaded some. The report added that demand for homes was at its weakest levels since the pandemic started but was above 2019 levels.
The number of new sales agreed has also fallen by 15 per cent over the last week.
There has also been a spike in asking price reductions with homes for sale due to higher borrowing costs and weaker demand.
House price fall this year unlikely
Zoopla said that house prices are “unlikely” to fall this year despite the hit to demand, however it did say that surveyors were more likely to reduce value in the “face of greater uncertainty and reports of deals falling through”.
The firm said that some sellers could accept price reduction to get sales through to completion, which could then be passed along the chain risking the transaction.
“Those would-be sellers who need a certain sale price to unlock their next move will likely step back from the market in the short term and reconsider their position in early 2023,” it added.
Zoopla said that “large downward moves in asking prices” would need to be seen before national measures of completed house price sales start to record price falls.
It explained: “The reality is that the rest of 2022 will be about closing out the pipeline of sales and minimising fall-throughs, rather than seeing a lot of homes come to the market for sale.”
Zoopla said that there was a “huge equity cushion” to absorb price falls, and a nationwide fall in 15 per cent in house prices would lead to “very few cases” of negative equity.
Demand will continue for select buyers
Zoopla said that the final three months of the year was usually not strong for new buyer activity, making up less than a fifth of new buyer demand over the typical year.
It said that it expected “continued demand from a smaller group of buyers who are committed to proceed”.
Zoopla continued that sellers and buyers need to be “flexible and realistic given the shifting economic backdrop”.
