Buyer enquiries fall 13% amid higher mortgage rates and increased uncertainty: Zoopla

The UK housing market is seeing steady levels of sales activity despite rising uncertainty linked to events in West Asia, as tensions push up mortgage rates and reduce buyer demand, the latest data from Zoopla shows.

While the market remains active, it is increasingly being driven by a smaller group of committed buyers as some households start to delay moving decisions. This is creating a growing gap between weaker buyer demand and more stable levels of sales agreed.

Zoopla’s data shows that buyer demand has been running below last year’s levels across the first three months of the year. Demand has weakened further over March, reflecting the impact of the war in Iran with enquiries 13% lower than a year ago as potential buyers adopt a more cautious, ‘wait and see’ approach. Average mortgage rates have increased by 0.4 percentage points in the last month, with many sub-4% deals being withdrawn as financial markets, and buyers, adjust to uncertainty over the inflation outlook.

However, sales agreed are proving more resilient than demand, registering a decrease of just 2% year-on-year. This reflects the continued presence of 'committed movers' – buyers with mortgage offers agreed and/or a clear need to move – who are continuing to support the number of sales agreed.

Fewer buyers, but more motivated movers supporting sales

This gap between buyer demand and more stable sales agreed is reflected across the country. Buyer enquiries have decreased by between 7% and 19% year-on-year, with the largest decline in active buyers recorded in the North East and West Midlands, albeit with enquiries falling off a high base compared to last year. 

Meanwhile, sales agreed are holding up more consistently, with more modest declines in northern regions of England, again off a high base. Unlike buyer demand, sales agreed are flat or slightly higher in some regions - such as Wales, Yorkshire and the Humber and London compared to last year.

At the same time, the overall number of homes for sale has increased by 6% year-on-year, reflecting a continued desire among homeowners to move despite the more uncertain backdrop. 

A significant proportion of transactions are also less sensitive to rising mortgage rates. Around a quarter of sales are cash purchases, while many existing homeowners have built up equity and secured borrowing in advance, reducing the impact of higher mortgage rates. This is helping to support sales in the short term, but also highlights growing reliance on less mortgage-rate sensitive buyers.

House price growth remains stable

Overall, UK house price inflation is holding steady at 1.3% year-on-year, with little immediate impact from the recent weakening in buyer demand. Price trends remain uneven across the country. Growth is strongest in more affordable areas, with the North West recording annual growth of 3.5%, though price falls across southern England have moderated in recent months despite a softening in demand.

Zoopla does not expect house price growth to slow in the near term, although this depends on demand remaining stable in the coming months. A pricing impact would require a more sustained decline in buyer activity and sales volumes meaning current growth rates are set to continue.

Richard Donnell, executive director at Zoopla, said: “The market remains active, but becoming increasingly reliant on a smaller pool of serious buyers. Some early stage buyers are adopting a wait and see approach but there is a sizable group of committed buyers who are pressing ahead with housing purchases. 

"If mortgage rates stabilise at current levels we expect sales activity to continue to hold up well compared to last year. Further increases in borrowing costs could weaken demand and impact sales volumes later in the year. The outlook is far from clear although we can see demand has stabilised over recent days.

"For buyers, there is less competition and more choice, but affordability is becoming more stretched. For sellers, homes are still selling, but buyers are more selective and price-sensitive. Setting a realistic asking price with the help of a local agent will be critical to securing a sale.”