Demand for new homes from first-time buyers has dropped by a third since the former chancellor announced his mini-budget, according to measurements from property company Zoopla.
As mortgage rates soared to highs of 6%, it put the biggest squeeze on new buyers since the late 1980s.
The company warned that “mortgage rates of 4% to 5% are likely to be the new norm” even after rates have dropped back in recent days.
Mortgage rates soared after the mini-budget, with many lenders pulling products from the market as they needed time to reprice them.
It came as investors were concerned that the Bank of England would be forced to keep upping its interest base rate if the Government pushed ahead with its policies.
Since then, the Government has been replaced and most of the policies abandoned, but rates are still set to rise according to market watchers – just not by as much as markets thought some weeks ago.
There have been big drops in new buyer interest in the South East where demand was down 40% and the West Midlands – down 38%.
There were lesser falls of 24% in Scotland and 20% in the North East of England.
“New buyer demand has dropped quickly in the face of higher borrowing costs, it’s like the Christmas slowdown has come a month early,” said Zoopla executive director Richard Donnell.
“We don’t expect to see any impact on pricing levels between now and December and this will only start to materialise in early 2023. It takes several months for pricing to adjust in the face of weaker demand.”
The company said that house prices had grown 8.1% in the last year, amid high demand and low supply in recent months.
The number of homes for sale is 13% lower than the average over the last five years.
Mr Donnell said: “The most likely outcome for 2023 is that we see a fall in mortgage rates towards 4% with a modest decline in house prices of up to 5%.
“The labour market remains strong and the supply of homes for sale is below average creating a scarcity of homes for sale that will support pricing.”
Content provided by Radio NewsHub. Originally published on 2022-10-31 05:02:00.