Mortgage Meltdown hurts landlords’ capital appreciation hopes

If this was typical of the past 10 years we would be talking of a 0.6 per cent average house price rise over the past month.

But after 12 successive Bank of England base rate rises (and another one likely this week) is now hurting landlords hoping to sell up at a premium price.

Rightmove says average new seller asking prices fell by £82 this month to £372,812. 

The portal says this is the first monthly drop in new asking prices this year, and the first at this time of year since 2017. 

It says buyer affordability constraints and more pricing realism from new sellers have brought forward the usual summer slowdown. 

“There have been some significant increases in fixed mortgage interest rates over the last few weeks following stubbornly high inflation figures, piling pressure onto already very stretched budgets” the portal admits.

Rightmove spokesperson Tim Bannister says: “Average new seller asking prices, the first and leading indicator of new trends in the market, have dropped slightly this month, signalling that the belated spring price bounce has quickly turned into an earlier than usual summer slowdown. 

“We expect asking prices to edge down during the second half of the year which is the normal seasonal pattern, and while we sometimes re-forecast our expectations for annual price changes at this time, current trends suggest that our original forecast of a two per cent annual drop in asking prices at the end of 2023 is still valid. 

“Agents report that new sellers are sitting in two camps – those who still have overoptimistic price expectations following the buoyant pandemic market, and those who have adapted to the new conditions and are coming to market with a competitive price. 

“Sellers who price competitively are much more likely to find a suitable buyer quickly before their home appears stale, and they can often then negotiate on price on any onward purchase.”

Over the last two weeks, Rightmove’s statistics show no effect on demand but a modest impact on sales activity as movers navigate the latest mortgage rate rises.

The number of buyers enquiring to agents about properties for sale is still six per cent higher than the same two weeks in the more normal market of 2019, while the number of sales agreed during this period is six per cent lower, a slight drop from agreed sales figures being three per cent behind 2019’s levels in May. 

However, it remains to be seen whether the expected further increase in interest rates will impact these figures further.

The turmoil in the mortgage market over the last four weeks are creating renewed disruption and uncertainty among movers trying to calculate how much they can afford to borrow and repay. 

In the last four weeks, the average mortgage rate for a five year fixed 85 per cent Loan To Value mortgage has jumped from 4.56 to 5.20 per cent. 

This means that a new buyer purchasing a property at the current average asking price would now expect to pay an extra £117 per month if repaying the mortgage over a 25-year term.

By comparison, the average rate for the same mortgage product changed from 4.50 to 4.52 per cent over the previous four weeks, highlighting how quickly the mortgage market has become more uncertain. 

This is leading more prospective buyers to check their current affordability, with daily visits to Rightmove’s Mortgage in Principle service up by 53 per cent compared with before the unexpectedly high inflation figures.

“We expect that there may be more change to come depending on this week’s inflation figures and the Bank of England Base Rate decision. It is likely to feel very frenetic for those taking out a mortgage right now, as they try to quickly lock in the best rate that they can find” adds Bannister.

Want to comment on this story? Our focus is on providing a platform for you to share your insights and views and we welcome contributions.
If any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals, then the post may be deleted and the individual immediately banned from posting in future.
Please help us by reporting comments you consider to be unduly offensive so we can review and take action if necessary. Thank you.