By Sarah Macklin 
New data from Zoopla has shown that almost half (42%) of house sellers are accepting lower offers on their homes in an effort to sell quickly. It suggests they’re accepting up to 5% less. With the average house value at £290,000 as of January 2023, this could mean a reduction of £14,500.
Why are sellers accepting lower offers?
The main reason they’re accepting low offers is because of rising interest rates. Many homeowners who are looking to buy somewhere new are having to decrease their budget so they can afford their monthly repayments. Last month, the Bank of England raised interest rates to a new high of 5.25%. It’s a bit of a last-ditch effort to save money each month amidst the cost of living crisis.
Adding to this, nearly one in six (15%) are accepting a discount of more than 10%, whilst buyers are pushing for an average reduction of 3.8%.
What does this mean for the housing market?
This comes after Oxford Economics revealed that the UK housing market is expected to experience a shock fall in property prices until the second half of 2025. Prices are expected to fall by 11% compared to their peak in 2022 as the market continues to feel the effect of the Bank of England’s (BoE) latest interest rates rise, pushing millions of homeowners into higher mortgage repayments.
Zoopla revealed that despite agreed sales being 8% higher than the five-year average, annual house price growth has decreased by 1.2%. The continued rise of interest rates has become a major issue for borrowers as mortgage and loan costs are set to be higher. According to figures from UK Finance, 800,000 fixed mortgages will expire before the end of this year, and for those who renew their mortgages will spend an average of £2,900 a year in additional interest rate payments, as highlighted by think-tank, Resolution Foundation.
How are interest rates affecting the housing market?
In light of all this, David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – explains how the latest interest rates rise is affecting the property market.
“Due to the decision from the Bank of England to raise interest rates to 5.25%, homeowners coming off fixed-rate deals and moving straight into a 6% mortgage are going to be unable to afford them. That’s going to lead to a load of repossessions and forced sales which is not good news. Fundamentally it’s going to shatter confidence in the market.
“Such an environment will lead to a slowdown in property sales, as well as a potential decline in property prices, impacting both existing homeowners and those aspiring to join the property ladder. The latest interest rates announcement is also set to affect first-time buyers who may now be unable to make a first step onto the housing ladder due to unaffordable mortgage rates.
“The rise will also have a knock-on effect on the rental market too – it has already been suffering from a lack of supply, and now, with a growing number of would-be buyers in need of a place to live, this is going to be exacerbated further. The result of this is that rental prices and competition will likely increase at a time when people are already struggling.
“I think what should be considered is having a maximum cap on mortgage payments for homeowners, with the remaining amount of increased interest being added on to the balance of the mortgage. By doing this, more homeowners will be able to afford their monthly payments and it will mean more people and families can keep their homes. Everybody’s just about managing at the moment and if you look at the underlying factors that created this inflationary cycle, they’re not in the control of consumers.”
