First-time buyer enquiries plunge as rates curb demand

First-time buyers have put moving plans on hold in the wake of the Bank of England’s decision to raise the base rate to 4% last week. Estate agents have observed a 27% drop in inquiries from this group compared to the same period last year, according to Zoopla.

The property website reports that buyer interest is slowing across all property types, from flats to country houses. The number of sales agreed is down 10.5% year-on-year, leading to a 9% increase in available homes as more properties remain unsold. Notably, the supply of two-bedroom houses has risen by 14%, and listings under £200,000—mostly flats—are up by 13%.

“Higher mortgage rates have reduced the buying power of all buyers by an average of 15% compared to the start of the year,” he said. “Higher mortgage rates over the year have reflected expectations of further increases in the base rate, with the Bank of England decision last week making more buyers pause and wait. The good news for those ready to move is that there are more homes to choose from, particularly at the more affordable end of the market. Sellers need to recognise that buyers have more choice and pricing realistically is increasingly important.”

The Royal Institution of Chartered Surveyors (Rics) echoes these findings, with members reporting falling or stagnant demand, fewer buyer inquiries, and fewer sales agreements. Their 12-month outlook is the most pessimistic since July 2023.

Regional disparities are evident, particularly in Southern England. The South East has the widest gap, with homes for sale up 12% and sales down 16%, leading to a 0.6% annual price drop. The East of England sees listings rise 17% and sales fall 8%, with prices down 0.5%. The South West has 12% more homes for sale and prices decreasing by 0.4%.

In contrast, Northern England shows resilience. The North West maintains 3.2% annual price growth, though sales are below last year’s levels. The North East reports 2.4% growth, as higher mortgage rates have a lower cash impact in these regions. Tom Bill, head of residential research at Knight Frank, notes, “First-time buyers are particularly affected because of the need for a deposit and the increased mortgage rates that are associated with higher loan-to-value ratios. Events in Washington rather than Westminster are shaping the outlook for the UK housing market. A lasting diplomatic solution in the Middle East would lower energy prices and inflation expectations and that would be of greater benefit to first time buyers than anything announced in the Budget.”

Mortgage rates have risen due to inflation expectations fueled by Middle East tensions, delaying hopes for rate cuts. Prospective buyers and those refinancing should explore options early, as fixed-rate deals may reset at higher costs. The Financial Conduct Authority regulates most mortgage brokers, but buyers should verify credentials.