Half of home sellers forced to cut asking prices as mortgage rates hammer property market

Half of all property sellers in England and Wales were forced to cut their asking prices to get deals over the line last month, new figures show, as a market downturn continues.

The share of homes sold after price reductions hit the highest level in at least nine years in July, according to analysis by Hamptons estate agents.

It came as house prices fell for the fourth month in a row.

The average cost of a property declined by 2.4pc in the 12 months to July, according to the Halifax house price index, having dropped by 2.6pc in June.

House prices have now fallen by nearly £9,000 since their peak last summer. A typical home is now worth £285,044, down from £293,992 last August.

Halifax said demand from first-time buyers is holding back further falls. Kim Kinnard of the lender said: “We’re seeing activity amongst first-time buyers hold up relatively well, with indications some are now searching for smaller homes, to offset higher borrowing costs.”

House prices are falling fastest in the commuter belt South East, where values have slumped by 3.9pc in the last 12 months. The average home has lost £15,500 of its value, with the typical property in the region now costing £382,489.

Values are tumbling as interest rates climb. Mortgage rates have more than doubled since the end of 2021, when the Bank of England started raising interest rates. 

The average rate on a two-year fix has jumped from 2.9pc to 6.84pc, according to Moneyfacts, a data company. This means the monthly cost of taking out a £200,000 loan has jumped by £455.

High mortgage rates meant 50pc of sellers in England and Wales were forced to cut their asking prices before they could agree a sale last month, Hamptons said.

The share was exactly double the low of 25pc recorded in May last year.

Cracks are showing across the market. LSL Property Services, one the largest valuation services in the country, issued a profit warning on Monday citing “significant changes in the mortgage market”.

LSL’s revenue in the first six months of the year was £104m, a drop of 57pc compared to the same period in 2022. Its underlying profits fell by 75pc to £3.5m.