Home sales in the UK are on course to fall to the lowest level in more than a decade as a result of surging mortgage costs, real estate firm Zoopla reported in its house price index published this week.
The number of house purchases in Britain is expected to drop by 21% year-on-year to about 1 million this year, down from 1.26 million last year and the 14-year high of 1.48 million recorded in 2021, when low interest rates and pandemic tax breaks boosted buying.
Demand for residential housing over the past four weeks slumped by 34% compared to the average for the last five years, as soaring mortgage rates and cost-of-living pressures weigh on the market, according to the report.
“It is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage reliant buyers,” said Richard Donnell, executive director at Zoopla.
“Cash buyers are more immune and on track to account for more than one in three sales in 2023,” he added.
A typical two-year fixed mortgage stood at 6.73% on Tuesday, while the average five-year fixed contract was 6.21%, according to Moneyfacts.
The number of house sales funded by mortgages is predicted to drop by 28% this year, while cash sales will remain relatively resilient, falling just 1% in 2023, according to Zoopla.
The report added that “rates need to fall below 5% before we see an increased appetite to move home in the second half.”
The Bank of England hiked interest rates for a 14th consecutive time on August 3, bringing the benchmark that underpins most mortgage lending rates to a 15-year high of 5.25%.
Mortgage approvals in the UK dipped for the first time in three months in July to 49,444 authorized home loans, according to the latest report from the regulator.
For more stories on economy & finance visit RT's business section