UK housing searches rebound as higher mortgage rates keep buyers cautious

UK homebuyer activity has begun to recover from its summer slowdown, with searches for properties rising across every region for the first time in a year despite borrowing costs continuing to weigh on affordability.

The number of people searching for homes rose 7 per cent in the four weeks to August 16 compared with the same period a year earlier, according to analysis by property portal Zoopla.

The increase was strongest in the east and south-east of England and in Wales, suggesting that prospective buyers are beginning to return to the market after a period of caution.

Zoopla said the rise represented an early indication of strengthening demand, although it warned that increased online searches would take time to feed through into enquiries and completed transactions.

The recovery comes as sellers continue to put properties on the market. The overall stock of homes available for sale on the platform is 5 per cent higher than a year ago, although the number of newly listed properties remains below last year’s level.

The housing market has been constrained by the rise in mortgage rates earlier this year, following volatility in financial markets linked to the conflict in the Middle East. Rates have subsequently edged lower, but remain significantly above levels seen at the beginning of the year.

Zoopla said the average five-year fixed mortgage rate had increased from below 4 per cent in January to about 4.8 per cent. The higher cost of borrowing has forced some prospective buyers to delay purchases, reduce the amount they can borrow or increase their deposits to maintain comparable monthly repayments.

House prices have also continued to rise, albeit at a slower pace. The average UK property price increased 0.9 per cent year on year in July to £272,800, according to Zoopla’s house price index, compared with annual growth of 1.3 per cent in June.

Richard Donnell, executive director at Zoopla, said the market had been affected by both borrowing costs and political uncertainty.

“Many buyers have taken a ‘wait and see’ approach over the summer months in response to higher borrowing costs and political uncertainty.

“The low point for activity was mid-July around the time of the World Cup final.

“Since then we have seen a steady increase in the number of people searching for a home, assessing their options ahead of the post-holiday rebound in sales market activity.

“This is a nationwide trend and the first time searches for homes are up across Britain this year.

“Average mortgage rates have stabilised but remain closer to 5% than 4%, meaning affordability remains an important factor for many home buyers choosing their next home.”

The rise in searches points to a potentially stronger autumn for the UK housing market, although the gap between buyer interest and completed sales remains significant.

For now, prospective purchasers appear willing to return to the market to assess their options, but the persistence of relatively high mortgage rates is likely to remain a key constraint on how much of that interest converts into transactions.