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Property Market Resilient Despite Higher Mortgage Costs

Recent data reveals that despite a substantial increase in mortgage repayments, the UK property market has shown resilience with a 12% year-on-year increase in sales, signaling renewed confidence among buyers and ongoing adaptation to economic conditions.

Sales Surge Amid Economic Pressures
According to Zoopla, the number of property sales agreed has risen by 12% compared to last year. This increase comes even as annual mortgage costs for a typical home buyer are 61% higher than in 2021. The rise in sales volume is significant, considering UK house prices have remained largely static, with a slight decline of 0.2% reported. Zoopla anticipates the market to achieve 1.1 million sales in 2024, which would mark a 10% increase from the previous year, provided that sellers maintain realistic pricing.

Mortgage Challenges and Regional Impacts
The spike in mortgage rates, from below 2% in March 2021 to around 4.5% now, has significantly impacted buyer affordability, contributing to a drag on house price growth. The average home buyer, with a 70% loan-to-value mortgage, now faces annual repayments that are 61% higher than three years ago—rising from £7,100 to £11,400. This increase is primarily driven by higher mortgage rates, though a 13% rise in house prices over the same period also plays a role.

The burden of increased mortgage costs has been felt most acutely in southern England, where higher property prices have led to the most substantial hikes in repayment costs. For example, in London, the annual cost of mortgage repayments for an average-priced home has risen by an additional £7,500 compared to 2021.

Local Market Dynamics and Price Adjustments
Despite these challenges, nearly two-thirds of all homes are in local markets experiencing annual price declines—down from 82% last October. The most significant price drops are observed in southern England, where between 95-100% of homes are in markets with annual price falls. However, the scale of these declines remains modest, mostly ranging between 0% and -3%.

Richard Donnell, Executive Director at Zoopla, comments on the trend: “The rebound in sales being agreed continues for a fourth month as mortgage rates have fallen, consumer confidence improves, and home buyers have much greater choice of homes for sale. The pipeline of sales is growing, and we expect 100,000 more people to move home in 2024 than last year.”

Donnell further notes, “There is clear evidence that house prices are firming and the pace of price falls is slowing. We don’t believe that prices will start to rise as buyers face much higher mortgage repayments than in the recent past. The market is adjusting to higher borrowing costs and what we need is continued price stability which will create the environment for continued growth in sales and home moves. It’s important sellers remain realistic on what they can achieve for their home.”

Nathan Emerson, CEO of Propertymark, also reflected on the market’s recovery: “The housing market is still recovering from the economic turbulence of the last three years and is going through a process of correcting itself. Homebuyers’ confidence and their eagerness to move home is starting to show as more sales complete and our own Housing Insight Reports indicate how positive the market is starting to look, with an 18% increase in new properties coming to the market.”

The current dynamics in the UK housing market underline a complex balance between mortgage affordability, buyer confidence, and realistic property valuations, shaping a unique phase of adjustment and growth in the sector.