House prices in some parts of the country are starting to fall with Cornwall heading for the biggest drop as demand for second home buyers drops and mortgage rates start to rise.
Last month the county recorded one of the largest drops in buyer demand in the country after the mortgage market was sent into turmoil.
The share of homes on offer in Cornwall fell by 14.5 per cent between June and September according to data company PropCast.
Over the same period demand fell in every county in the UK but rural and coastal holiday areas recorded the steepest falls, Cornwall Live reports.
West Glamorgan and Clwyd in Wales each recorded a 15.4pc drop.
Duncan Ley, of Humberts estate agents in Truro has said ever since the mini-budget last month, soaring mortgage rates mean activity has tanked.
Mr Ley said: “Now we are probably doing 50 per cent of the transactions we would normally expect at this time of year."
The pandemic property boom in Cornwall was driven by a huge surge in second home buyers, which is quickly disappearing, he added.
Jonathan Cunliffe, another estate agent in Cornwall, said: “Second home buyer numbers have fallen by 70 per cent to 75 per cent since their peak in the summer of last year.”
But fading pandemic-era trends meant this group of buyers was declining long before the mini-Budget, Mr Cunliffe said.
“Some people were buying because they couldn’t go abroad, and now they can," he said.
"Then there were a lot of people who brought forward planned moves, maybe by five years – which means, inevitably, that there will now be a lag in demand.
“This reminds everyone that those two years [in the property market] were freak years for the most far-flung parts of the country and the coastal markets. There was no way those numbers could have been sustained.”
According to Moneyfacts - a data provider - since the mini-Budget, the average rate on two-year-fixed-rate mortgage has increased from 4.74 per cent to 6.43 per cent.
That means a buyer taking out a £200,000 loan will pay an extra £6,760 in extra interest over the course of the deal compared to if they had purchased with a mortgage offer secured before the Chancellor's speech.
Mortgage rates are still rising fast and are likely to keep increasing. The mortgage market is changing so quickly that it is almost impossible for buyers to know what their budget is.
Mr Ley said. “If a buyer is getting a mortgage for a purchase, they need to recalculate what they can afford, and inevitably they are not house hunting in that time.
“During the summer, we were getting four or five offers on a property. In September, we were getting one offer per property.
"Now, everything is on hold.
“We have buyers who said they were looking for homes up to £900,000. Now, they are looking up to £750,000 because of the affordability of their mortgage."
Higher mortgage rates are also hitting buyers’ ability to pass affordability tests, which means the amount they can borrow is shrinking fast.
Although second home buyers are wealthier and therefore better shielded from rate rises, some are getting hit because they will often fund their purchases by remortgaging their main home.
Mr Ley added: “People are not going to want to refinance at 7pc, so they will be putting those plans on hold.
