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Mortgages

Homebuyer demand on the up as consumer confidence rises and rates fall

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
28/09/2023

Homebuying numbers have increased by 12% over the past month but despite the improvement it remains a buyers’ market.

Compared to September 2021, there are 80% more homes available for sale putting buyers who can afford today’s higher mortgage rates firmly in the driving seat over price negotiations.

The discount to the asking price for newly agreed sales is averaging 4.2% or £12,125 below the asking price, according to Zoopla’s September House Price Index.

Discounts are highest in London and the South East at 4.8%.

While purchasers are prepared to drive a hard bargain over the price, they are not prepared to compromise on the size of the home as the share of buyer demand by property type and size remains virtually the same as a year ago.

That is despite having 20% less buying power since mortgage rates rose.

This unwillingness to compromise, says Zoopla, is because buying a home is a big and expensive life event. Instead of compromising, younger buyers are taking longer mortgages to boost their buying power in comparison to previous generations.

Meanwhile, house prices, which have fallen by 0.5% over the last 12 months, are on track to be 2 to 3% lower by the end of the year. However, they remain 17% higher than pre-pandemic levels.

The number of new sales agreed has also increased and is closely tracking levels seen in 2019.

Improved consumer confidence

The small increase in buyer demand, measured by enquiries to estate agents, is partly seasonal says Zoopla. It also reflects improved consumer confidence which is at a two-year high and homeowner expectations of lower mortgage rates which are currently on track to fall below 5%. The closer rates get to 4%, the more buyers will come back into the market ‒ further supporting demand and sales agreed, according to the property portal.

All regions in the UK have experienced an increase in demand, particularly in the South East (+19%) and London (+16%).

Richard Donnell, executive director at Zoopla, said: “The housing market continues to adjust to a higher mortgage rate environment. Better news on inflation and the end of base rate increases has provided scope for lenders to start reducing mortgage rates which has supported a modest uptick in demand for homes this September. Buyers continue to remain cautious and many are waiting for better value for money and improved affordability from lower house prices or further falls in mortgage rates before returning to the market.

“House price falls have been modest with the average house still 17% more expensive than before the start of the pandemic. Forbearance by lenders, tougher mortgage regulations over recent years and a strong labour market appear to have moderated the stress in the market compared to previous cycles that would have driven larger price reductions.”