Mortgage borrowing costs have reached their highest level in three years, with the average five-year fixed mortgage rate hitting 6% this month. This marks the highest level since September 2023, according to Moneyfacts.
The rising cost of borrowing is weighing on buyer confidence. Fresh figures from Knight Frank show that country house prices have fallen by 4.2% over the past year. This covers urban and rural properties valued above £750,000 outside London.
Mortgage approvals in August were 14% below their five-year average, according to Bank of England figures. Property transactions were broadly flat against the same benchmark, HMRC reported.
Tom Bill, head of UK residential research at Knight Frank, stated that the high cost of borrowing is a pressing issue for buyers and those remortgaging. He noted that mortgage rates have climbed since the Middle East conflict began in February, pushing inflation expectations higher.
Political parties are also adopting different positions on property taxation ahead of the Budget, adding to uncertainty for buyers and sellers. The Conservatives plan to scrap a proposed council tax surcharge on homes worth £2m or more and abolish inheritance tax on primary residences. Labour is pursuing higher taxes on expensive properties.