House prices fell 1.3% in the last six months says Zoopla, but will now stay flat

House prices have fallen 1.3% over the past six months, but new sales agreed in May are 11% higher than normal despite weaker demand

  • Prices rose by 1.9% last year, compared to 9.6% the year before
  • Zoopla says buyers are coming to terms with higher interest rates

Home prices fell 1.3 percent over the past six months as higher mortgage rates and the rise in the cost of living hit demand, according to Zoopla’s latest home price index.

The real estate platform expects prices to remain more or less stable in the coming year, despite the restoration of confidence in the market.

Prices rose by 1.9 percent over the past 12 months, a significantly slower growth than the year before, when there was an increase of 9.6 percent.

Shock: The market was shocked at the end of last year by higher mortgage prices

Richard Donnell, executive director at Zoopla, said: “Higher-than-expected inflation data has raised the likelihood of further rate hikes.

This will have a knock-on effect on mortgage rates, which are likely to rise in the coming weeks.

“This would reduce purchasing power and demand for housing in the second half of the year, and the impact will depend on how much rates rise.”

Despite weaker demand, the number of new sales agreed last month was 11 percent higher than the five-year average for the same period, according to Zoopla.

Because many buyers also sell a house, more sales lead to an increase in the flow of new homes that is 16 percent higher than the five-year average.

Improving housing activity over the past two months proves that mortgage rates of 4 to 4.5 percent are generally manageable for new homebuyers, the real estate website said.

However, borrowers needing to take out a new mortgage and move off a fixed rate will still face a significant shock as interest rates more than double their late-2021 lows.

Zoopla says mortgage rates of 4 to 5 percent are consistent with a house price rise of +2 percent to -2 percent and around 1 million sales a year, as long as the UK continues to see a strong labor market.

Mortgage rates, however, appear to be rising again. Last week, Nationwide raised some rates by up to 0.45 percent, and others followed suit.

All in all, the number of home sales this year is on track to be 20 percent lower than last year.

Slump: All UK cities lost house price growth momentum in the year to April 2023

Slump: All UK cities lost house price growth momentum in the year to April 2023

Donnell cautioned that while more sales are being negotiated, sellers need to remain realistic about prices to pique buyer interest.

Nearly one-fifth (18 percent) of homes currently for sale on Zoopla have had their asking prices slashed by 5 percent or more, even though cuts are down from 28 percent in February.

Price reductions usually come eight weeks after the initial listing, as sellers try to pique buyers’ interest.

And while some properties are making small cuts in selling prices, Zoopla says there’s no build-up of unsold inventory, so bigger price cuts aren’t necessary.

The number of homes listed for more than 90 days is in line with the five-year average in most areas.

Interest rate rises: Mortgage rates have fallen after the peak, but are creeping back up

Interest rate rises: Mortgage rates have fallen after the peak, but are creeping back up

In particular, Zoopla’s data showed that 1 in 10 (11 percent) of homes for sale had been previously rented, a level that peaked at 14 percent in 2020 and has been declining over the past 3 years.

Landlords are selling properties in response to higher mortgage rates and a stricter tax regime that has come into effect over the past five years.

House price increases over the past 7 years have ranged from just 12% in London to 47% in Wales. While the average income increased by 30 percent in the same period.

Areas where house prices are growing faster than earnings are in line with those where demand is currently below average.

By contrast, the regions and countries with the lowest price inflation since 2016 show stronger activity.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate contract is about to expire, or because they have agreed on a home purchase, should explore their options as soon as possible.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to borrow again?

Borrowers should compare rates and speak with a mortgage broker and be prepared to trade to secure a rate.

Anyone with a fixed-rate deal expiring in the next six to nine months should research how much it would cost them to re-mortgage now — and consider getting a new deal.

Most mortgage agreements allow fees to be added to the loan and are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with an agreed home purchase should also aim to secure rates as soon as possible so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current highs, due to higher mortgage rates limiting people’s borrowing capacity.

Compare mortgage payments

The best way to compare mortgage rates and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that match your home value, mortgage size, term and fixed interest needs.

However, bear in mind that rates can change quickly, so if you need a mortgage it’s advice to compare rates and then speak to an estate agent as soon as possible so they can help you find the right one mortgage for you.

> Check out the best fixed rate mortgages you can apply for