First-time buyers have pulled back more from home purchases after the increase in mortgage costs after the mini-budget, according to a report showing a broad-based slowdown in the property market.
Figures from the Rightmove real estate platform show buyer demand fell 20% in October from a year ago, as home hunters halted property searches in response to rising borrowing costs and growing economic uncertainty.
Interest rates rose last month after Liz Truss’ mini budget, adding hundreds of pounds to mortgage payments. About a year ago, the new two-year flat average rate was priced at 2.25%, but in recent weeks the new rates have jumped above 6%.
Rightmove’s monthly home price index showed first-time buyers were the most hesitant, with demand dropping 26% in October. Demand from “second interns” hoping to move from their first home fell 17%, while interest among those at the top of the real estate ladder fell by 15%.
Research by the Royal Institution of Chartered Surveyors, published last week, revealed that inquiries from new buyers fell for the sixth consecutive month in October, and survey feedback on buyer demand was negative across the UK. It now takes an average of 18 weeks to sell a property, up from 16 weeks a year ago.
However, despite the decline compared to last year’s figure, Rightmove said buyer demand remains 4% higher compared to pre-pandemic levels for 2019.
Tim Bannister, director of property science at Rightmove, said: “While many continue to move, especially those who have already approved a purchase, it is understandable that there are people who stop to think.
There is a group willing and able to move and waiting on the sidelines for more financial certainty. Then there are the group of first-time buyers or people hoping to trade who were already financially expanding themselves and their plans may now be shattered.”
The slowdown in market activity has caused more sellers to cut asking prices in attempts to agree on faster sales. In October, 8% of Rightmove’s unsold properties were reduced, double the 4% registered in the same month in 2021.
However, it is just a slight increase on the 7.5% of unsold properties that were reduced in October 2019.
“The era of historically low interest rates and buying frenzy is over, which could give way to a more normal market opening potential opportunities for those who have been late to enter the frenetic market over the past two years,” Bannister said.