Homeowners are now accepting slightly lower offers
Those with properties to sell are beginning to accept slightly lower offers on their homes rather than waiting for the market to pick up again, according to Zoopla.
The property portal’s latest House Price Index has revealed a jump in the proportion of sellers accepting discounts of five per cent or more off the asking price to achieve a sale.
This is the highest level since 2018.
The impact of mortgage rates and cost of living pressures means that buyers who are in the market are driving a harder bargain in comparison to recent years.
Some 42 per cent of sellers are accepting discounts over five per cent on the asking price to secure a sale, while 15 per cent are accepting discounts of over 10 per cent off the initial asking price.
Mortgage rates tipping above five per cent have delivered a further 10 to 20 per cent hit to the buying power of those who are purchasing with a mortgage (70 per cent of sales).
Mortgage rates moving from four per cent to five per cent results in an 11 per cent reduction in buying power. However, this increases to 20 per cent with mortgage rates at six per cent up from four per cent.
This hit to buying power won’t instantly result in lower house prices and buyers can continue to offset the impact of higher mortgage rates by either increasing their deposit and/or taking longer mortgage terms.
However, these aren’t options for everyone and the further mortgage rates increase above five per cent, the more buyers are squeezed out of the market.
Richard Donnell, executive director at Zoopla, says: “The resilience of the housing market and homebuyers is set to be tested once again as mortgage rates increase over five per cent.
“Mortgage rates falling to four per cent earlier this year supported a rebound in sales and led to house prices registering small month-on-month gains.
“Modest price falls will resume in the second half of 2023 as the supply of homes increases giving buyers more choice and room for negotiation on price.
We still expect house prices to be five per cent lower over 2023 and there is a very substantial equity buffer to absorb price falls which are likely to be concentrated across southern England.
“Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”