Mortgage rates are feeding through to seller pricing, according to Rightmove, with new sellers in four of the five lowest-priced parts of Great Britain setting lower asking prices in October.
The portal’s daily mortgage tracker puts the average two-year fixed rate at 5.55%, up from 5.29% a month ago and 4.25% before the war in Iran began in February. That has added around £250 a month to the cost of a typical new mortgage.
Nationally, asking prices for newly listed homes rose 1.0% (+£3,575) to £371,015, leaving them virtually flat on a year ago at -0.1%. Rightmove says the rise masks mixed seller reactions in an already price-sensitive market. Higher borrowing costs now appear to be biting harder in regions that had held up relatively well this year:
- North East: down 2.0%
- Scotland: down 1.9%
- North West: down 0.6%
- Wales: down 0.3%
- Yorkshire and the Humber: up 0.3%, the only exception among the five
Colleen Babcock, property expert at Rightmove, said: “The rapid rise in mortgage rates is really beginning to hit buyers’ budgets.
"We’re now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain, where prices had been more resilient this year. It’s an early sign that higher mortgage costs are putting pressure on affordability even in markets with lower property prices, affecting the areas and types of property that buyers can afford.
"This is a stark reminder of how price-sensitive the market is, and the message from agents, backed up by our data, remains the same - that competitive pricing from day one of marketing is critical to capitalise on initial buyer interest.”
Sales activity holding up so far
Rightmove’s real-time daily data shows the number of sales agreed is 8% lower than a year ago, which the portal puts down to tougher conditions this year, though the figure is broadly in line with the year to date.
Deals are still being done for the right properties at the right price. Rightmove sees the lack of a further fall, despite volatility in the mortgage market and higher costs since February, as a positive sign for underlying demand, and an indication of where the market could be if affordability pressures eased.
New potential buyers contacting agents are down 9% on a year ago, while new listings are up 3%. The number of homes for sale is at its highest for the time of year since 2014, which Rightmove says is contributing to muted asking price growth among new sellers.
Rightmove's mortgage expert, Matt Smith, noted: “It’s been a difficult few weeks for home-buyers who have been watching mortgage rates rise quickly, particularly for those who had worked out what they could afford based on lower rates earlier in the year. Some buyers will understandably be reassessing their budget and what they can afford or feel comfortable borrowing.
“The fact that sales activity hasn’t fallen back further so far shows that many people still want to get on with their move. Monthly budgets are going to be stretched, but the market is incredibly hard to predict, particularly with so many complex global factors affecting the cost of borrowing, so home-movers must also concentrate on what’s in front of them.
He added: "Whether it’s borrowing less, finding a larger deposit, or negotiating the price down on an onward move to accept a lower offer, there could be options for home-movers to explore.”
The Budget is adding a further layer of uncertainty. Financial markets will be watching how the announcements affect the outlook for government borrowing, inflation and interest rates. Some first-time buyers may be waiting for more detail on the recently announced Your First Home scheme for new build properties, while other households consider what the wider announcements could mean for their finances.
Babcock added: “Higher mortgage rates are putting pressure on affordability across Great Britain, but sellers appear to be responding in different ways.
"Some have room to lower their expectations, while others need to hold firm on price to make their next move add up, even if that means waiting longer for a buyer. In such a price-sensitive market, the guidance and expertise of a local agent are paramount.
"The forthcoming Budget adds some uncertainty too, with financial markets hoping that will improve the outlook for interest rates, while potential home-movers will be waiting to see how they are directly or indirectly affected.”
London bucks the pattern
Asking prices there rose 2.5% in October, the biggest increase in Great Britain and a reversal of the longer-term trend. The rise follows a weak summer in which London prices fell 6% across July and August, and new sellers are now clawing back some of that ground. The capital remains the weakest region annually, with prices 1.7% below a year ago.
Rightmove points to other factors behind the jump. London typically sees stronger seasonal growth at this time of year, as sellers with flexibility on timing come to market in autumn, when more buyers are active, rather than in the slower summer. The effect is most pronounced at the top end, where Inner London prices rose 3.9% and lifted both the national and London averages.
After a subdued year, some London sellers may also feel they have little room to go lower without making their onward move unaffordable. Sellers in more northerly regions, who have had a stronger year for prices, may have more room to adjust their expectations.
Wider indicators do not support a broader London recovery: sellers are reducing the price of 38% of listings, homes take 78 days on average to find a buyer, and 42% of homes successfully find one. London performs weakly on all three measures against the rest of Great Britain.
Marc von Grundherr, director of Benham and Reeves, comments: “There’s certainly an element of seasonality at play, with the summer firmly behind us and the London market gearing up for one final push before Christmas.
"However, we’re also seeing something of an ‘enough is enough’ mentality among London sellers, many of whom recognise that while the market has been subdued this year, London bricks and mortar remain one of the strongest assets they can hold. For these homeowners, selling for anything less than what they consider a reasonable price simply isn’t a sensible move, particularly if they have little urgency to sell.
“There’s also a degree of renewed optimism surrounding the Autumn Budget, with the prospect of further government measures to stimulate the housing market helping to improve sentiment, even if the finer details remain unclear. At the top end of the market, we also have the looming mansion tax to consider. While speculation around reducing the threshold to £1.5 million has now been put to bed, owners of properties valued above £2 million still face an additional annual tax from April 2028.
von Grundherr concluded: “This could well be encouraging some higher-value London homeowners to bring forward their selling plans, with a greater concentration of these properties coming to market also helping to push the capital’s average asking price higher. Of course, stronger asking prices don’t necessarily translate into stronger achieved prices, and sellers will still need to be realistic if they want to secure a buyer in what remains a relatively price-sensitive market.”
