Housing activity fell by 25% in April as increased mortgage rates continue to hit buyers

Home sales and purchases fell by a quarter in the year to April, official figures show, as higher mortgage rates continue to hit buyers

  • HMRC figures also show an 8% drop between the months of March and April
  • Higher mortgage rates have made it more expensive to get up a ladder or move house

Housing market transactions plummeted in April, falling by a quarter year-on-year as rising mortgage rates undermined consumer confidence.

According to HMRC’s seasonally adjusted figures, house purchases and sales were down 25 per cent compared to the previous year, at 82,120. It was also down 8 percent from March 2023.

March saw a spike in activity due to an increased number of working days compared to April, and the deadline for buying a house with the government’s stock loan assistance scheme.

Down: The number of people buying and selling homes is down 25% year-on-year

Between January and March 2023, housing transactions were slightly below pre-coronavirus levels, with a total of 270,000 transactions compared to 283,540 in 2020.

Chris Druce, senior research analyst at Knight Frank, said: ‘An improving economic outlook and a solid job market have supported buyer sentiment in recent months and created an active spring sales market after the mini-Budget knocked the sector off track last year.

“However, the cost of a mortgage is significantly higher than it was a year and a half ago, and this year there will be more pain in the system as people’s fixed-rate mortgages come up for renewal.

“With expectations of further interest rate hikes ahead of last week’s inflation data, and an increase in supply, we believe property prices will fall by a few percent this year.”

Mortgage rates first started rising in December 2021, when the Bank of England began raising its base rate to counter rising inflation.

However, this gained momentum after the mini budget at the end of September. The pound tumbled after the then Chancellor, Kwasi Kwarteng, announced a wave of unfunded tax cuts that confused bond markets.

After falling since early spring this year, mortgage rates have risen over the past week as lenders react to higher-than-expected inflation and forecasts of further base rate hikes.

Mortgage rates have leveled off, but are expected to rise again in response to another Bank of England rate hike

According to Moneyfacts, the average two-year mortgage rate in April was 5.35 percent, while the average five-year mortgage rate was 5.05 percent.

This is more than 2.86 percent and 3.01 percent in April last year.

On a £200,000 fixed mortgage over 25 years with a two-year term, the change in rates would push monthly payments up from £934 last year to £1,210 now. It works out to an extra £3,313 per year.

Currently, the average two-year fixed rate is 5.45 percent and the five-year average fixed rate is 5.12 percent.

Iain McKenzie, chief executive of the Guild of Property Professionals, said: ‘It is clear that there has been an adjustment in the property market, but that should come as no surprise given the financial challenges faced by households.

“The market is moving slower than this time last year, when it was whipped up at a breakneck pace. Homes went from offer to offer in weeks.

Affordability remains the biggest barrier to home ownership as households are hesitant to commit to a mortgage they can’t afford. Because rents continue to rise, it will also be difficult to save for a deposit.’

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

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