How are Rising Interest Rates Impacting the Property Market?

Since our last update, there has been another base rate increase by the Bank of England, bringing interest rates to a significant 5%. This drastic half percent rise reflects the Bank's efforts to tackle the prevailing inflationary pressures. Naturally, such a development prompts questions about its influence on the property market and whether we have reached a tipping point.

Ryder & Dutton

Reflecting on June

Before we delve into our outlook for the property market, let's reflect on the events of June. Despite the cooling conditions, the number of sales agreed during the month remained remarkably similar to figures from 12 months ago. This observation holds true not only for our business but extends to the entire market within our region. Such resilience is a testament to the property market's ability to weather various challenges. Additionally, robust price data further supports this notion.

Price Stability

In June, the average asking price for new listings reached £245,000, up from £235,000 12 months ago. Similarly, the average price of properties entering into contracts stood at £218,000, a slight increase from £215,000 a year ago. These figures indicate a sense of stability and normalcy within the market, despite recent interest rate hikes and subsequent rises in mortgage rates.

Reaching a Tipping Point

The question remains whether the recent interest rate increase has pushed the market to a tipping point. There is a palpable level of uncertainty permeating the market, which is gradually impacting real estate transactions at the grassroots level. The increased availability of properties for sale, now twice as much as a year ago, has provided buyers with a broader range of options. Consequently, we are witnessing a doubling of price reductions compared to 12 months ago. This begs the question of whether these reductions will translate into actual house price declines.

The Balancing Act

The current state of the market resembles a delicate balancing act, with sellers on one side and buyers on the other. The scales could tip in either direction depending on the trajectory of mortgage rates. While the economy and property market have weathered the recent interest rate increases relatively well, there is a limit to how much more the market can endure, especially in terms of price rises. If mortgage rates continue to rise, reaching 6%, it would likely add significant pressure on buyers and signal a true tipping point in favour of buyers.

Looking Ahead

As we look ahead, the future trajectory of mortgage rates will play a significant role in shaping the market. If rates stabilize or decrease in the coming year, we may see a more favourable environment for sellers again. However, if rates continue to rise, the scales will likely remain tipped towards buyers. We will continue to closely monitor these developments and keep you updated through our video series.

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