Client budgets are stretched by 5.55% two-year fixes ahead of the 28 Oct Budget
Average asking prices for newly listed homes in Great Britain rose 1.0% in October to £371,015, but are 0.1% lower than a year ago as higher mortgage rates weigh on sellers, Rightmove’s House Price Index shows.
The index covers 104,164 asking prices for homes listed between 13 September and 10 October, and shows a £3,575 monthly gain. Rightmove said its daily tracker puts the average two-year fixed mortgage rate at 5.55%, up from 5.29% last month and 4.25% before the war in Iran began in February. It estimates that adds about £250 a month to a typical new mortgage.
The Bank of England voted six to three to hold Bank Rate at 3.75% in September, with three members backing a rise to 4%. Its next decision is due on 5 November.
For wealth managers, the figures offer a prompt to revisit clients’ borrowing assumptions, especially those set when rates were lower.
Rate pressure reaches cheaper regions
Rightmove said new sellers in four of the five lowest-priced areas cut asking prices. The North East fell 2.0%, Scotland 1.9%, the North West 0.6% and Wales 0.3%. Yorkshire and the Humber rose 0.3%.
Colleen Babcock, Rightmove’s property expert, 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.”
Tomer Aboody, founding director of specialist lender MT Finance, said: “Higher mortgage rates, a pending Budget and the prospect of further taxes – this time on the banks – is creating further uncertainty, lower sales and keeping a lid on values.”
The Guardian reported that Chancellor John Healey is poised to raise taxes on banks. Healey said on Thursday that he has decisions to take, and that his comments were not a steer on any tax change.
Rightmove said sales agreed are 8% lower than a year ago, in line with the year to date. Buyers contacting agents are down 9% and new listings are up 3%. Homes for sale are at their highest level for this time of year since 2014.
“It’s been clear in our offices for several months now that the double whammy of expected mortgage rate rises and shocks in the Budget is compromising confidence and activity,” Jeremy Leaf, a north London estate agent and former RICS residential chairman, said.
“In such a sensitive market we are finding only sellers who recognise the importance of competitive asking prices are standing out from the crowd and succeeding in finding a buyer.”
London rebounds, led by the top end
London asking prices rose 2.5%, following a 6% fall across July and August, and remain 1.7% below a year ago. Inner London rose 3.9%. Rightmove said wider indicators do not point to a broad recovery. In the capital, 38% of listings are being reduced, homes take 78 days on average to find a buyer, and 42% find one.
Marc von Grundherr, director of Benham and Reeves in London, noted that the planned surcharge on £2 million-plus homes starts in April 2028, after talk of a £1.5 million threshold was put to bed. The High Value Council Tax Surcharge applies in England and runs from £2,500 to £7,500 a year, according to the House of Commons Library. Healey has reportedly ruled out lowering the threshold, according to The Times.
Von Grundherr said: “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.”
Healey delivers his first Budget on 28 October. Rightmove said some first-time buyers may be waiting for more detail on Your First Home. The government said on 26 September the equity loan scheme would pair a 2.5% deposit with a 20% loan on new builds in England, with details due at the Budget.
