Zoopla: House sales hit yearly high but outlook depends on BoE rate hike

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published 30 May 2023

Agreed property sale prices reached their highest point of the year in May according to latest data from Zoopla - but the rebound in activity could be hampered by rising mortgage rates, raising questions on whether the UK property market will continue to rebound it said.

Across the past six months, house prices have fallen 1.3%, the property website found, but the rate of decline appears to be levelling off on the back of growing buyer confidence. According to the property site’s latest house price index, the number of new sales agreed over the last four weeks was 11% higher than the five-year average for the same period.

This follows an increase in the flow of houses coming on to the market, but sellers remained realistic about the asking price. Around 18% of homes currently for sale on the site have had the asking price cut by 5% or more - in February, this figure was 28%.

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Rate hike could undermine confidence and prices

The latest round of statistics shows the annual rate of house price growth is 1.9% for the UK – down significantly from 9.6% last year. But across the UK, the picture is more varied with rates ranging from -0.2% in London to 3.6% in Wales.

Zoopla said it expects house prices to remain broadly the same for the rest of the year.

But on the back of the latest inflation data and the likelihood of a further rate rise by the Bank of England, mortgage rates could edge higher in the coming weeks.

Richard Donnell, Zoopla’s executive director of research, said: “This would reduce buying power for those using a mortgage and limit the ability of buyers to move, keeping house price growth very low in the second half of the year with the likelihood prices could drift lower.

Meanwhile, the number of property sales in 2023 is on track to be 20% lower than last year.

Sarah Coles, head of personal finance at Hargreaves Lansdown said all eyes will be on the Bank of England as it mulls over another potential rate hike.

“Higher mortgage rates would make it more difficult for new buyers to get an affordable mortgage, which could dampen demand and could bring prices down,” she said.

For remortgagers, some may be “forced to sell up, boosting supply” while an imbalance of supply and demand could “dent prices.”

Zoopla said robust activity over the last two months indicates that 4-4.5% mortgage rates are “generally manageable for home buyers,” despite this being double the rates of late 2021.

Mortgage rates of 4-5% would lead to price growth of between +2% to -2% and around one million sales a year, Zoopla’s research indicates, so long as the labour market remains strong. But should rates move above 5%, the impact on people’s ability to get a mortgage and buy a home will be greater, boosting the likelihood that UK house prices will start to fall.

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Tom is a journalist and writer with an interest in sustainability, economic policy and pensions, looking into how personal finances can be used to make a positive impact. He graduated from Goldsmiths, University of London, with a BA in journalism before moving to a financial content agency.

His work has appeared in titles Investment Week and Money Marketing, as well as social media copy for Reuters and Bloomberg in addition to corporate content for financial giants including Mercer, State Street Global Advisors and the PLSA. He has also written for the Financial Times Group.

When not working out of the Future’s Cardiff office, Tom can be found exploring the hills and coasts of South Wales but is sometimes east of the border supporting Bristol Rovers.