Property market grinds to a standstill as higher borrowing costs and fears of a Burnham
The housing market is grinding to a halt as elevated borrowing costs and fears of a property tax raid by Andy Burnham sap demand among would-be buyers.
Figures from the Bank of England show just 56,205 mortgages were approved last month, which is down from 66,034 in April and the lowest number since December 2023.
Research by property website Zoopla found that three in five homes listed for sale since January are yet to find a buyer, while house sales are down 7 per cent year-on-year.
‘Higher mortgage rates and political uncertainty have shrunk the pool of committed home buyers,’ the report said.
‘A change of prime minister and questions over future tax and spending priorities in the Autumn Budget have added to the uncertainty.’
Industry experts warned of worse to come this summer as speculation mounts over Burnham’s plans if, as expected, he takes over from Keir Starmer next month.
Property slump: Figures from the Bank of England show just 56,205 mortgages were approved last month, which is down from 66,034 in April and the lowest number since December 2023
It is feared he is plotting a property tax that would punish those in more expensive areas.
Tom Bill, head of UK residential research at Knight Frank, said: ‘A summer of tax speculation could stifle demand in the housing market for the second year running.
‘After the seasonal spring bounce this year was cut short by higher mortgage costs arising from the Middle East conflict, it means buyers and sellers may not get a chance to properly catch their breath.’
Zoopla said house prices are just 1.4 per cent higher than a year ago, with a clear North-South divide emerging. While prices in the North are up 3.5 per cent, prices have fallen in London for nine months in a row.
Zoopla said higher borrowing costs have added £125 a month to the cost of the average mortgage – or £1,500 a year.
But with houses typically costing more in parts of the South, London buyers have seen mortgage costs rise by £244 a month, or more than £2,900 a year, compared with an increase of just £69 a month, or close to £830 a year, in the North East.
Zoopla said this ‘explains why some markets have slowed sharply while others are holding up’.
Sales are down 3 per cent in the North East and 4 per cent in Scotland. But they have fallen 9 per cent in London, 10 per cent in the East of England and South West, 11 per cent in the East Midlands and 12 per cent in Wales.
Richard Donnell, executive director at Zoopla, added: ‘Higher mortgage rates have hit sales and squeezed affordability alongside increased political uncertainty.’
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