First-time buyer enquiries for homes have collapsed by 27 per cent in the past week compared with the same period last year, following the Bank of England's decision to raise the base rate to 4 per cent, according to property website Zoopla. Buyer interest is weakening across all property types, from flats to country houses, with the number of sales being agreed tracking 10.5 per cent lower than last year. The slowdown in purchasing activity has left more homes unsold on the market, with the total number of properties for sale up 9 per cent year-on-year. Two-bedroom houses have seen particularly sharp increases in supply, up 14 per cent, while homes priced below £200,000 have risen 13 per cent.
The shift in supply and demand dynamics is putting downward pressure on prices as sellers compete harder to attract fewer buyers. Richard Donnell, executive director at Zoopla, highlighted that first-time buyers are critical to the market, accounting for four in 10 sales last year. He noted that higher mortgage rates have reduced the buying power of all buyers by an average of 15 per cent compared with the start of the year, causing many to pause and wait following the Bank of England's recent decision. The Royal Institution of Chartered Surveyors has also warned that housing demand is either falling or stagnant, with its members reporting the most pessimistic outlook on future property sales since July 2023.
The impact is most severe in southern England. In the South East, homes for sale are up 12 per cent while sales agreed have fallen 16 per cent year-on-year, with house prices dropping 0.6 per cent over the same period. The East of England shows even larger supply increases at 17 per cent, alongside an 8 per cent fall in sales agreed and 0.5 per cent price decline. The South West follows a similar pattern, with homes for sale up 12 per cent and prices down 0.4 per cent. Tom Bill, head of residential research at Knight Frank, said that higher borrowing costs mean many people have delayed moving across London and the south of England, with first-time buyers particularly affected by the need for a deposit and higher loan-to-value mortgage rates.
Northern England presents a markedly different picture. The number of homes for sale remains broadly stable and house prices continue to rise, with annual growth of 3.2 per cent in the North West and 2.4 per cent in the North East, as the impact of higher mortgage rates carries a lower cash cost than in the south. However, sales agreed remain below last year's levels even in these regions. Bill pointed out that events in international markets, rather than domestic policy, are shaping the outlook for the UK housing market, with conflict in the Middle East driving up inflation expectations and dashing hopes of interest rate cuts.
For borrowers, higher mortgage rates mean reduced purchasing power and the need to explore options as soon as possible, particularly for those seeking a new mortgage or with fixed rate deals approaching renewal.