The phone has all but stopped ringing at Mullucks estate agent in Bishop’s Stortford – save for calls from buyers with bad news about the chains collapsing.
Since Chancellor Kwasi Kwarteng’s mini budget two weeks ago, a chill has gripped the housing market in the Hertfordshire suburban town. Viewing figures, house prices and customer confidence are cooling rapidly after lenders closed thousands of mortgage deals, only to return with much higher interest rates.
So far this month, Mullucks has had just 20 views, down from 232 for the whole of September, as the crucial fall sales season threatens to fade with a whimper.
A buyer called the office on Wednesday morning to say the mortgage they had been offered would now cost £3,000 a month, far more than their original quote, meaning they could no longer afford the house they were interested in , says William Wells, Residential Sales Manager.
“The result is that your money doesn’t go that far. People say, “I was hoping to buy it, but it’s no longer available. They have to aim lower,” says Wells, a four-decade veteran in the real estate business.
Wells expects total views in October to be down 50% from the previous month. “It’s a pretty significant drop,” he adds.
Good schools, grand Victorian and Edwardian houses and fast connections to London – the train to Liverpool Street takes 40 minutes – mean that single-family homes in Bishop’s Stortford often sell for over £1million. Mullucks, part of the Hunters estate chain, also caters to first-time buyers moving from London but don’t want to be too far from the capital.
The market town, which the estate agent describes as ‘on the rise’ – was a sought-after location for those leaving the capital in search of more space during the pandemic, a trend which has continued as many people have permanently moved to work from home.
Around the station, new apartment buildings are springing up to meet this demand. However, brewing turmoil in the housing market threatens to halt this growth.
The average rate for a new two-year fixed mortgage exceeded 6% for the first time since 2008, according to the latest data from Moneyfacts. The average rose by 4.74% on September 23, the day of the mini-budget. At the beginning of December last year, it was 2.34%.
The higher rates are eating away at household incomes at a time when inflation is at 9.9%, near a 40-year high. For the estimated 300,000 borrowers who exit a fixed-rate deal every three months, and those with variable rates, huge swaths of income are now being eaten up by mortgage costs.
The Mullucks team has already seen these higher rates translate into lower selling prices. In September, the average sale price was 104%, meaning properties were 4% above asking price, but this figure has fallen to 98% in the month to date, indicating that a drop in real estate prices started.
This trend is mirrored across the country, with the latest data from Halifax showing prices falling 0.1% in September. The bank said the market, which had been nearly flat since June, was now slowing more significantly due to rapidly rising borrowing costs, making buying property unaffordable for more people.
The average UK house price is now £293,835 as the pace of annual growth slowed for the third consecutive month, from 11.4% in August to 9.9% in September.
The problem is having a ripple effect on potential sellers who are now being told their home is likely to fetch a lower price and are considering waiting for the market to pick up before trying to sell. For those who can’t wait to move, they risk selling their home for much less than it was worth a few months ago.
“The market has been the weirdest market for 24 years; that has changed,” says Martin Nash, residential sales manager at Mullucks. His advice to sellers worried about not getting fair value for their properties is “don’t force the market, let the market find the number.”
“With this market, interest rates, stamp duties and everything else, just put it on [the market] at the right price. If it is worth more, it will bring in more,” he adds.
A seller, who asked to remain anonymous, had previously been told his five-bedroom detached house could be valued at £1.2million – a similar property in the area sold for around that amount over the summer . But during an appraisal on Wednesday, he was told to expect an asking price in the region of £900,000.
“One concern is that I actually missed the market, and I know I’m going to be moving from here in the next five years, so I blame myself for not moving faster in the summer,” says- he. “I’m in a relatively lucky position. I don’t have to move, I want to, but I want the best deal for me and my family.
The rocky market has caused uncertainty over whether to sell his home now or wait for a higher valuation later, which means he would have to withdraw the offer he made on another property.
“It must be hellish trying to get a mortgage right now,” he says, raising fears of “falling valuations all the way down the chain.”
This scenario is already playing out in some housing chains. Wells talks about a buyer whose mortgage offer recently ran out and was then offered a new offer at a much higher rate. They in turn asked the seller to reduce the price by £20,000 to make up the difference – which was agreed.
Delays are common when buying a home, but their length has grown in Wells’ 40 years in business. Previously it took five weeks from agreeing a sale to exchanging contracts, now a 20 week delay is normal.
Buyers, sellers and agents find it frustrating in calmer market conditions, but delays are more difficult at a time when an expired mortgage offer could make the property in question unaffordable for the buyer.
“It’s a house but it’s also a house, you got involved, and [if it falls through] there’s absolutely nothing you can do about it,” Wells says.