There has been a 45 per cent fall in London estate agent inquiries, reports Zoopla
(Picture: Shutterstock / ZGPhotography)Demand for homes in London has almost halved since the disastrous mini-Budget as thousands of panicked buyers scrap plans to purchase properties.
Latest data from property portal Zoopla shows a 45 per cent fall in the number of people making direct enquiries with estate agents, seen as an accurate measure of activity in the market. The fall is far bigger than the 37 per cent decline for the UK as a whole and shows how the London market — where prices are at all-time highs and by far the most expensive in Britain — is most vulnerable to the impact of mortgage rate increases.
Fixed mortgage rates have soared since the September 23 fiscal statement from Kwasi Kwarteng sent the gilts market into a near death spiral. Data from analysts Moneyfacts show the average interest rate on a two-year fixed mortgage today standing at 6.45 per cent, while the average five year rate is 6.28 per cent.
Only a year ago some deals were priced at less than one per cent.
Yesterday’s 0.75 per cent hike in the Bank of England rate will also immediately add around £115 to the monthly cost of a typical London mortgage.
Market commentators said they are seeing the number of price reductions increase as conditions swing from a sellers to a buyers market.
Richard Donnell, executive director of research at Zoopla, said: “Our data shows asking price reductions are higher in outer London areas and the commuter belt where house price growth has been strongest across London over the pandemic.”
Meanwhile brokers and agents said they foresaw a big slump in market activity over the winter which is likely to feed through to a fall in prices.
Ross Boyd, CEO at mortgage advisers Dashly.com, said: “Demand has been dropping off in recent weeks anyway as mortgage rates soared following the mini-Budget and people took stock, but rates rising to three per cent will see many people firmly batten down the hatches.”
Aaron Strutt of mortgage brokers Trinity Financial said: “Purchase activity is understandably stalling as buyers get cold feet and it is not a surprise given the massive monthly mortgage repayments many will need to find to pay for a property.”
A new analysis revealed more than a million homeowners in London and the South-East will be hit with higher mortgage bills by the end of next year. More than 200,000 London homeowners were estimated to face an immediate rise in mortgage payments as they are on variable rates.
A further 251,000 are in line for a mortgage bill increase by the end of 2023 when their fixed rate period will have finished.
Boroughs with the most homeowners affected by increased mortgage payments include Barnet, Bexley, Bromley, Croydon, Enfield, Havering, Hillingdon, Lewisham, Redbridge and Wandsworth, according to the analysis by the Labour Party.
Across the wider South-East, 252,000 homeowners on variable rates will see their mortgage bills go up shortly, with a further 315,000 by the end of next year as they come off fixed rates.
Mayor Sadiq Khan said: “Londoners are paying the price for the Tories’ catastrophic management of our economy.”
Government minister Chris Philp, MP for Croydon South, said many of the factors fuelling inflation and hitting the economy were global ones, including Vladimir Putin’s war in Ukraine and the aftermath of the Covid pandemic.
Brexit is also damaging the UK economy, according to former Bank of England governor Mark Carney and many other experts.
Mr Philp, who was a Treasury minister in the 50-day Liz Truss government, refused to apologise for the mini-Budget which sent the pound into a nosedive, as well as pushing up the cost of government borrowing and mortgage rates.
He said: “The decisions around the mini-Budget were taken principally by the then-prime Minister and to a lesser extent the then-Chancellor.”
A study by the Lib Dems highlighted how constituencies in the Tory “Blue Wall” in southern England will be hard hit by rising mortgages, with some homeowners in areas such as Harpenden, Esher and Wimbledon facing annual bill rises of over £10,000.
The 0.75 per cent rate rise was the biggest since 1989 and came with a dire warning from the Bank that Britain was at the start of a two-year recession, which would be the longest on record.
