Home sellers ‘raise prices despite rising interest rates and cost of living crisis’ | House prices

Home sellers have continued to raise their asking prices despite borrowers facing higher interest rates and the cost of living, according to data from property portal Rightmove.

The average price of a house coming on the market rose by £2,587, or 0.7% month-on-month in September to £367,760, according to the firm.

The price increase was concentrated in the middle and higher end of the market as homeowners tried to get on the property ladder. Prices in the so-called second stepper category – three-bedroom houses and four-bedroom non-detached properties – hit a new record average asking price of £340,513.

Rightmove housing expert Tim Bannister said the UK market remains “surprisingly resilient” despite growing economic pressures.

The rise in UK interest rates last week to 2.25% will increase the financial burden on borrowers. Rightmove reports that new first-time buyers pay an average monthly mortgage payment of £1,057, which will rise to £1,114 a month if lenders pass on the latest half-point rate rise.

Last week’s stamp duty changes by Chancellor Kwasi Kwarteng could give property prices another boost, at least in the short term. No tax should be paid on properties worth up to £250,000, while the threshold for first-time buyers will be £425,000.

Bannister predicted the changes could lead to “some unusual price increases in the coming months” if there is a big jump in prospective buyers competing for a limited number of properties for sale.

“The first-time buyer threshold change means we could see more first-time buyers,” he said.

Richard Davies, MD of estate agent Chestertons, says the changes could be particularly important for first-time buyers in London, but agreed they could also drive more house hunters into the market, driving up prices.

“If this added demand is not met quickly, the tax cut could stimulate the existing supply and demand imbalance, which consequently leads to an initial rise in property prices,” Davies added.

But if interest rates continue to rise to fight inflation, as markets expect, mortgage affordability will suffer as loan repayment costs rise.

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