© Reuters. FILE PHOTO: A construction worker stands on a scaffold platform on a new housing development under construction in Knutsford, Britain June 1, 2023. REUTERS/Phil Noble/File Photo
LONDON (Reuters) – Asking prices for residential homes in Britain fell in July as rising mortgage costs and increasing buyer affordability constraints prompted sellers to tempered their price expectations, an industry survey showed on Monday.
Property website Rightmove (OTC:) said average asking prices of homes coming onto the market declined by 0.2% last month, compared with the 0% norm for this time of the year.
Tim Bannister, director of property science at Rightmove, said stubborn inflation and further mortgage rate rises contributed to the fall in prices and number of agreed sales.
Britain’s housing market has been hit by rapid increases in interest rates, which financial markets expect to rise to 6.25% by the end of this year from 5% now, adding to pressure on homeowners and buyers.
“The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market,” Bannister said.
House prices have also shown the impact from higher rates, with mortgage lenders Nationwide and Halifax both reporting falls in annual prices in June as buyer demand softened.
The Bank of England, which has raised interest rates at its last 13 meetings, is tasked with brining persistent inflation, running at 8.7% in May, back to its 2% target.
The central bank increased its Bank Rate by more than expected to 5% in June, pushing up the cost of mortgage borrowing. Average two-year fixed mortgage rates reached a 15-year high last week.
Righmove’s monthly survey showed buyer demand remained resilient this month, up 3% compared to the pre-COVID market of 2019.
“There remains a large volume of motivated buyers who can factor rate rises into their budgets and are continuing to enquire about homes for sale, which is keeping the market functioning,” Bannister said.
