What are the main advantages of making mortgage overpayments?
To combat rising mortgage rates, homeowners have begun making record numbers of overpayments in a bid to reduce how much they owe.
Homeowners overpaid their mortgages by a record £6.7 billion in the final three months of 2022.
It marks the first time overpayments have exceeded £6 billion in one quarter since records began in 1999.
According to the Equity Release Council, the total value of mortgage overpayments reached £23.3 billion last year.
The jump in overpayments is likely to have been triggered by rising interest rates as the Bank of England tries to bring down stubbornly high inflation.
By making mortgage overpayments, homeowners reduce the amount they owe, helping to offset some of the impact of higher borrowing costs.
What are mortgage overpayments?
Mortgage overpayments refer to the money you pay to your lender that’s above the standard monthly repayments you have to make.
You can generally make them as either a one-off lump sum payment or by increasing the amount you pay each month over your mortgage term.
Most lenders will allow you to make overpayments of up to 10% of the outstanding amount you owe each year without incurring a penalty, with some allowing you to repay as much as 20%.
What are the main advantages of making mortgage overpayments?
There are many advantages to making mortgage overpayments.
The main one is that it reduces the amount of interest you pay over the lifetime of your mortgage.
For example, if you borrow £200,000 over 25 years at an interest rate of 4%, you will pay a total of £116,702 in interest.
But if you increase your monthly repayments by £100 a month, from £1,055 to £1,155, you will pay only £98,681 in interest, saving you just over £18,000.
Not only that, but you will also repay your mortgage three years and five months sooner, meaning you will be mortgage-free quicker.
What other benefits are there to mortgage overpayments?
Making mortgage overpayments can also help to offset the impact of rising interest rates.
For example, if you have a £200,000 mortgage on which you are currently paying interest of 2%, your monthly repayments will be £848.
But if you are coming to the end of your deal and need to remortgage, your monthly repayments will jump to £1,055, based on a best-buy mortgage rate of 4%.
However, you can offset some of this increase by overpaying your mortgage to reduce the outstanding amount you owe.
For example, it you make a 10% overpayment reducing your outstanding mortgage to £180,000, based on the example above, your new monthly repayments will rise to only £950.
If you are able to make a 20% overpayment, the impact will be even bigger, reducing your new monthly repayments to £845 – broadly in line with what you are currently paying.
Another advantage of making overpayments is that it reduces the amount you owe relative to your home’s value. Lenders call this your loan to value (LTV) ratio.
Banks and building societies typically reserve their best deals for people with an LTV of 60% or less.
Even if you don’t qualify for one of the best deals, making overpayments could still help you move into a lower LTV tier, enabling you to benefit from a lower mortgage rate.
Finally, if you are struggling to keep up with your mortgage payments, lenders are often more likely to grant you a payment holiday if you have made overpayments in the past.
How to overpay your mortgage
There are two ways to make overpay your mortgage. You can either make a lump sum one-off overpayment or smaller, regular overpayments.
Both types of overpayment have benefits, and the most important thing is to only do what you can afford.
But if you are struggling to decide what to do, making one-off overpayments tends to have a bigger impact on your mortgage.
For example, if you take out a £200,000 mortgage with a 4% interest rate, making a one-off overpayment of £20,000 at the beginning of the term will save £30,179 in interest.
It will also mean you repay your loan three years and 11 months early.
By contrast, making overpayments of £100 a month on the same deal will save you just £18,020 in interest, even though the amount you are overpaying will amount to £25,900.
It will also knock three years five months off your mortgage term.
Can you overpay an interest-only mortgage?
When you overpay a repayment mortgage, you reduce the total amount you owe, which means you'll pay less interest on your mortgage and you'll pay it off more quickly.
When you overpay on an interest-only mortgage - and it is possible to do this - you don't get the same benefits.
With interest-only mortgages, you're only ever paying the interest on the loan, rather than reducing the actual debt itself.
Overpaying an interest-only mortgage can help to reduce future interest payments or the overall interest you pay, but it can't help to pay down the overall debt you owe.
Key takeaways
- Homeowners have overpaid their mortgages by a record £6.7 billion
- The jump is likely to have been triggered by rising interest rates, as the Bank of England tries to bring down stubbornly high inflation
- You can either overpay your mortgage using a lump sum, or by overpaying by smaller amounts each month
The best coronation events in London to celebrate King Charles III
London is filled with events and gets a big bank holiday weekend to mark the King’s coronation.
It’s time to ring off a big long weekend in your calendar in regal purple. Yep, there’s another big royal event on the horizon: King Charles III’s coronation, and it’s shaping up to be one big, long party. Plans for the shindig have been in the works since Charles took the throne back in September and the festivities are expected to include no less than two processions, a religious service and big ol’ concert at Windsor Castle.
Whether you’re a flag-wielding monarchist or a staunch Republican, there’s no getting away from the celebrations and one thing we can all get behind as part of the proceedings is that Monday May 8 will be a bank holiday. So we can all *fingers crossed* bag an extra day off.
You’ll probably be spared being marched up the Tower of London if you don’t fancy taking part in the festivities. But if you do want to have a royally good time there’s plenty going on across London in the name of a ‘National Celebration’. Here are the best ways in London to celebrate the start of Charles III’s reign in London.
When is King Charles’s coronation and where is it taking place?
The coronation will take place on Saturday May 6 2023, eight months on from his appointment as King on September 8 2022. Get excited.
We’ll all be getting an extra bank holiday to mark the occasion. Monday May 8 2023 has been named as the day. two days after the official coronation service at Westminster Abbey.
The ceremony will be held at Westminster Abbey. Charles will be crowned alongside the Queen Consort Camilla.
1. King Charles III Coronation Procession
Heads of state, British VIPs and other important-sounding people will descend on London for the coronation of King Charles III taking place on the morning of Saturday May 6 2023. The service will take place at Westminster Abbey, but you’ll have to have an invite in order to see that. However, if you still want to glimpse a slice of the action you can line the parade route to the service for free, also known as ‘The King’s Procession’.
The procession is due to start at Buckingham Palace and will head down The Mall before turning right around the corner of St James’s Park, through the Horse Guards Parade, down Parliament Street before ending at Westminster Abbey.
Hundreds of thousands of people are expected to line the route, so best get there early if you want a front row spot. There’ll also be screens in key areas if you sleep through your alarm.
2. The Coronation Concert
How do you celebrate a King’s coronation in the twenty-first century? With a big ol’ concert apparently. The Royal Family has confirmed a massive shindig will take place in Windsor Castle the day after King Charles III’s official ascension to the throne, promising to ‘bring together music icons and contemporary stars’. A world-class orchestra will play interpretations of musical favourites fronted by musicians and other performers and spoken word performances, all topped off with staging and effects on the Castle’s East Lawn.
3. The Royal Palace at Madame Tussauds
Marylebone
Step into Buckingham Palace and meet the Royals (kind of). Okay okay, it’s actually a recreation of the Royal gaff at Madame Tussauds, but on your visit you’ll be able to brush shoulders with the King and the Queen Consort (in wax form, of course) and snap as many pictures as you like, have a spot of afternoon tea and wave from the Royal Balcony.
4. Coronation Events at Biscuiteers
5. Mayfair’s Coronation Garden Party
Grab a deckchair, sip on some sparkling wine and watch the Coronation on a big screen in Grosvenor Square at this garden party. The soiree will also include plenty of food and drink stalls, immersive floral installations, live music and special offers in the nearby shops and eateries.
6. London Eye ‘Coronation Capsule’
Inflation stubbornly high but mortgage rates edge lower
Mortgage deals now available at sub 4% rates - and inflation still expected to fall quickly in the second half of this year.
Inflation remains stubbornly high suggesting the Bank of England will increase interest rates further.
The rate at which the cost of goods and services are rising – as measured by the Consumer Prices Index – fell slightly in March, dropping from 10.4% to 10.1%.
But the fall was lower than economists had been expecting, with inflation still more than five times higher than the Bank’s 2% target.
As a result, commentators are predicting the Bank’s Monetary Policy Committee (MPC) will increase the Bank Rate again when it meets in May, and possibly make further hikes later in the year, dashing hopes that interest rates had already peaked.
But despite rising interest rates, mortgage rates are continuing to fall, with best buy deals currently available with rates of less than 4%.
Why is this happening?
Inflation has remained stubbornly high, despite the MPC increasing the official cost of borrowing from 0.1% in December to 4.25% now.
The high level of inflation is being driven by a number of factors including the conflict in Ukraine, which has pushed food and energy prices higher, the resumption of normal life after Covid and issues relating to the weather.
A very hot summer in Asia and cold winter in Europe in 2022 increased the demand for electricity to power air con and heating, at a time when suppliers were hit by the invasion of Ukraine, which pushed fuel prices higher.
Adverse weather has also impacted food production, with hot weather across Europe affecting salad and soft fruit crops, while droughts in Argentina have affecting soybean harvests, further driving up food prices.
(Soybeans are used to make soybean oil, the main substitute for sunflower oil, which is in short supply due to the war in the Ukraine.)
However, economists are still expecting inflation to start falling quickly in the second half of the year.
In particular, they are predicting steep price falls in gas and electricity prices, which is good news for consumers.
Once inflation gets closer to its 2% target, the MPC can then consider cutting the Bank Rate to help support the economy.
What should I do if I need to remortgage?
While the prospect of another rise in interest rates may be alarming if you need to remortgage, you shouldn’t panic.
Mortgage rates have actually been moving in the opposite direction to interest rates for some time now, with the average cost of a five-year fixed rate mortgage falling by 0.23% since October, despite the Bank Rate increasing by 2% during the same period.
If you need to remortgage, you will have to decide whether or not to opt for a fixed rate deal or a tracker product.
Under a fixed rate mortgage, the amount of interest you pay will stay the same for the duration of your product term, typically two or five years, giving you the security that your monthly repayments will not increase.
If you take out a tracker deal, your interest rate will move up and down in line with changes to the Bank Rate.
Average tracker rates are currently 0.48% lower than the average two-year fixed rate mortgage, but this could change if the MPC increases interest rates again, as any rise would be passed on to you.
That said, if inflation does start to fall and interest rates are cut, you would benefit from the reduction if you are on a tracker mortgage.
If you opt for a fixed rate mortgage, you will need to decide whether to fix for two years or five years.
Five-year deals are currently 0.32% cheaper than two-year ones, but remember that despite high inflation, interest rates are still likely to be close to peaking, so if you fix for five-years you will be locked into these higher rates for longer.
It is also important to remember that fixed rate mortgages typically have early redemption penalties, so if you take out a five-year deal, you need to be confident you will not need to end it early.
Whatever you decide to do, it is important to shop around. The average rate charged on a two-year fixed rate mortgage is currently 5.32%, but the most competitive rates on offer start at 3.99%, with some five-year fixed rate mortgages available for 3.92%.
If you are coming to the end of your mortgage term, you should start planning now.
Lenders will let you ‘book’ a rate up to six months before you need to remortgage.
The average standard variable rate – the rate you are automatically put on if you do not remortgage - is currently 7.12%, so you want to avoid that if possible.
What does this mean for the housing market?
Although mortgage rates are significantly higher than they were a year ago, the number of people falling behind with their monthly repayments remains low by historic standards.
Lenders are expecting to see an increase in the number of people struggling with their mortgage, but this is unlikely to lead to a big jump in homeowners who are forced to sell their property.
This is partly because banks are obliged by the regulator to work with customers to find a solution and can only repossess a home as a last resort.
At the same time, employment levels remain high. In fact, recent government data showed that the unemployment rate is currently just 3.8%.
As a result, there are unlikely to be a high level of forced sales, which is good news for the property market.
Instead, higher interest rates are likely to cause activity in the housing market to be more subdued than in recent years.
The number of people looking to buy a home fell sharply in the wake of the mini-Budget, which caused a steep rise in mortgage rates.
But there are already signs that demand is recovering, with buyer numbers reaching their highest level since October in March.
Property values are just 1% lower than they were in October, and while some ‘soft repricing’ is expected to continue, with sellers making modest downward adjustments to match what buyers are prepared to pay, there are not likely to be steep house price falls.
Meanwhile, the number of homes for sale has increased, offering more choice for potential buyers following years in which the market has been plagued by a shortage of stock.
Key takeaways
- Inflation remains stubbornly high suggesting the Bank of England will increase interest rates further
- But mortgage rates are continuing to fall, with best buy deals currently available for below 4%
- And economists still expect inflation to start falling quickly in the second half of the year.
Landlords support new standards for rented homes
Six out of 10 landlords are in favour of the introduction of the Decent Homes Standard, the biggest shake up in the private rented sector for 30 years.
Six out of 10 landlords are in favour of government plans to introduce new minimum standards for rented homes.
A third of landlords said they strongly supported the Decent Homes Standard for properties in the private rented sector, while 28% said they generally supported it, according to research by Paragon Bank.
Only 8% of landlords questioned said they were unaware of the change.
The government has pledged to introduce the Decent Homes Standard for the private rented sector as part of the Renters Reform Bill, which will be introduced during the current parliamentary session.
Not only do landlords support the move, but 74% also expressed frustration with the lack of action taken against rogue landlords, saying local authorities should do more to drive out those who let sub-standard homes.
Richard Rowntree, managing director of mortgages at Paragon Bank, said: “The vast majority of landlords have nothing to fear from a Decent Homes Standard as they are providing a good quality home to their tenants already.
“It’s the minority of landlords who don’t meet these standards that are tarnishing the wider reputation of the sector.”
Why is this happening?
Although the majority of renters live in homes that are safe, the government wants to do more to help the one in five people who live in a property that is considered to be unfit, more than half of which pose a risk to renters’ health and safety.
The proportion of homes that are classed as being non-decent has nearly halved during the past five-years, falling from 44% in 2018 to 23% in 2023, according to the latest English Housing Survey.
Even so, nearly 1 million properties in the private rented sector are still classed as being non-decent.
The Decent Homes Standard requires homes to be in a reasonable state of repair, have reasonably modern facilities and services, and provide a reasonable degree of thermal comfort.
If homes fall below this standard, renters can have their rent repaid.
Who does it affect?
The introduction of a Decent Homes Standard is great news for those who rent in the private sector, as it means they will no longer have to put up with sub-standard accommodation.
The move also brings the private rental sector in line with the social one, which has had a Decent Homes Standard since 2001.
The research suggests the majority of landlords are also in favour of the change.
In fact, a separate study conducted by Paragon Bank found that 81% of landlords in the private rented sector upgrade each new property they buy, with 18% spending between £10,000 and £20,000 on improvements and 22% spending more than £25,000.
Around 83% of landlords said they made the changes to ensure they were providing a decent home to their tenants, while 82% said they wanted to make the property more attractive to tenants and 66% hoped to increase the rent they could charge.
What’s the background?
Alongside introducing the Decent Homes Standard, the Renters Reform Bill includes a number of measures to protect renters, including ending section 21 ‘no fault’ evictions.
Other changes include making it illegal for landlords to have blanket bans on families with children or people receiving benefits, and it will also be easier for renters to have pets.
Arbitrary rent review clauses will be outlawed, and notice periods for rent increases will be doubled. Renters will also have stronger powers to challenge rent rises if they think they are unjustified.
The introduction of the bill will also see all renters moved into a single system of ‘periodic tenancies’, enabling them to leave poor quality housing without remaining liable for the rent, and making it easier for people to move if their circumstances change.
The government claims the changes are the biggest shake up for the private rented sector for 30 years.
Key takeaways
- 74% of landlords also expressed frustration with the lack of action taken against rogue landlords, saying local authorities should do more to drive out those who let sub-standard homes
- The proportion of homes that are classed as being non-decent has nearly halved during the past five-years, falling from 44% in 2018 to 23% in 2023
- The change is part of the Renters Reform Bill, which gives renters greater rights
New planning permission rules for holiday lets in tourist hotspots?
New short term let rules being considered to protect communities in England's holiday destinations.
The government is proposing new rules for holiday lets to protect local communities in tourist hotspots.
Under the news rules, which are currently out for consultation, homeowners in England would be required to get planning permission before renting out their property as a short-term let.
The move aims to help prevent local people from being priced out of the property market in areas that are popular holiday destinations.
Michael Gove, Secretary of State for Levelling Up Housing and Communities, said: “Tourism brings many benefits to our economy but in too many communities we have seen local people pushed out of cherished towns, cities and villages by huge numbers of short-term lets.
“I’m determined that we ensure that more people have access to local homes at affordable prices, and that we prioritise families desperate to rent or buy a home of their own close to where they work.”
Why is this happening?
The popularity of short-term lets has soared in recent years due to a combination of online platforms, such as Airbnb, and a rise in people opting for staycations following the COVID-19 pandemic.
But while the jump in availability of holiday properties is good for tourists, local people in some tourist hotspots have found themselves priced out of the property market.
There have also been complaints that popular destinations have become ghost towns outside of the holiday season, while they also face labour shortages due to the lack of affordable local accommodation to rent or buy.
Who does it affect?
The move is potentially good news for people who live in tourist hotspots who are struggling to get on to the property ladder, as it should help to ensure that house price rises are more sustainable.
It is less good for people who had hoped to invest in a holiday let in a popular area, particularly if they are considering this as an alternative to a buy-to-let property, after these have been hit by significant tax rises in recent years.
But the move should not impact homeowners in holiday areas who want to rent out their home on an occasional basis, such as while they go away themselves.
The consultation is looking at whether homeowners should have the flexibility to rent out their home for a set number of nights, such as 30, 60 or 90 nights each year without needing to obtain planning permission.
The changes will only impact short-term lets, and will not affect hotels, hostels or B&Bs.
What’s the background?
The proposals come as the Department for Culture, Media and Sport launches a separate consultation on a new registration scheme for short-term lets.
The scheme aims to build a picture of how many short-term lets there are across the country and where they are located, to try to understand what impact short-term lets have on local communities.
Culture Secretary Lucy Frazer explained that while the government understood the benefits for tourists that flexible short-term lets offered, these should not come at the expense of local people who wanted to buy their own home.
It hopes that through gathering data on the situation, it will be able to help get the balance right and address some of the concerns of local communities.
Key takeaways
- The government is proposing new rules for holiday lets to protect local communities in tourist hotspots
- Homeowners in England would be required to get planning permission before renting out their property as a short-term let
- The move aims to help stop local people from being priced out of the property market in areas that are popular holiday destinations
Banks reduce lending: will mortgage rates go down?
Mortgage lenders are becoming more risk averse as a rising number of homeowners struggle to keep up with their mortgage repayments - but will mortgage rates go down?
Banks are becoming more strict with mortgage lending criteria as the number of people falling behind with their mortgage rose during the first three months of 2023.
Mortgage lenders expect this trend to continue going forward and, as a result, they plan to tighten their credit scoring criteria.
They will also reduce lending to people with smaller deposits, according to the latest Bank of England Credit Conditions Survey.
Mortgage lenders cited the changing economic outlook and a reduced appetite for risk for their increased caution, as well as the slowdown in the UK housing market.
The tightening comes at a time when demand for mortgages is expected to rise to a near-two-year high, particularly among people remortgaging.
But there is still good news if you're wondering whether mortgage rates will go down.
The interest charged on fixed-rate mortgages has recently fallen to a six-month low and there is a wide range of mortgage products to choose from.
Why are mortgage lenders tightening their criteria?
Household budgets have been impacted by the combination of the cost-of-living squeeze and rising interest rates.
The Bank’s Monetary Policy Committee (MPC) has increased the Bank Rate by 4.15% since December 2021, adding around £446 a month to mortgage repayments for someone with a £200,000 mortgage.
The cost-of-living crisis and these higher mortgage rates have impacted some people’s ability to afford their monthly mortgage payments.
And in turn, it's making lenders more cautious about lending.
But despite some problems in the US and European banking sectors, lenders are not anticipating a wider credit crunch such as that seen during the global financial crisis.
Buyers with smaller deposits to be most impacted by tighter mortgage criteria
Mortgage lenders have indicated that the drop in mortgage availability will have the biggest impact on home buyers with smaller deposits and homeowners with smaller equity in their properties.
There will be the biggest decline in mortgage lending to those with house deposits or equity of 25% or less, while there may be a slight reduction in lending to people with higher stakes in their home.
Understanding your loan-to-value ratio
Despite this, the availability of mortgages for people with a 10% deposit will only reduce slightly.
Mortgage lenders also expect no change in the number of mortgage applications they approve.
This is a significant turnaround from the final three months of 2022 when lenders were much more picky about who they lent to.
Number of available mortgage products recovers to pre-mini budget levels
While banks are tightening their lending criteria, there’s no need to be alarmed if you're buying or remortgaging.
The number of mortgage deals available has recovered to the same level as before the mini budget in October 2022. This includes more than 500 mortgages on offer for people with a 10% deposit.
Average mortgage rates have also continued to come down, despite increases to the Base Rate, with the typical cost of fixed rate deals recently falling to a six-month low.
The biggest decision will be whether to opt for a fixed rate mortgage, for which the interest rate stays the same for the term, or a tracker one, where the interest you pay moves up and down in line with the Bank Rate.
Will mortgage rates go down?
Average mortgage rates in the UK are currently:
-
4.48% for a tracker mortgage
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5.32% for a two-year fixed rate mortgage
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5.00% for a five-year fixed rate mortgage, although sub-4% mortgage rates are available if you shop around.
Back in February, the cost of a two-year fixed rate mortgage was 5.44% while the cost of a five-year fixed rate mortgage was 5.20%.
And in January these mortgage rates sat at 5.79% and 5.63% respectively, showing that mortgage rates have gone down over the first few months of the year.
Our Director of Research Richard Donnell thinks that fixed mortgage rates will be at 4-4.75% throughout 2023.
"We expect fixed rate mortgage rates for new business to sit between 4% and 4.75% for much of 2023. This is low by historic standards but means the average buyer will face an increase of £200 to £500-a-month more in mortgage repayments than at the start of 2022, when mortgage rates were much lower."
Which type of mortgage is right for you?
If you take out a tracker mortgage, your monthly repayments will increase if the MPC increases interest rates again. But you could also see them fall if the MPC starts to cut the official cost of borrowing.
If you prefer the certainty offered by a fixed rate mortgage, you will need to decide whether to fix for two years or five.
Mortgage calculator: work out your mortgage repayments
Five year deals are currently cheaper than two year ones, but interest rates are thought to be close to peaking. If mortgage rates start to come down, you’ll be locked into the rate for longer.
Whatever you decide to do, it’s a good idea not to stay on your lender’s standard variable rate for too long as these currently average a mortgage rate of 7.12%. This is the rate you automatically revert to when your current deal ends.
Key takeaways
- Banks are tightening their mortgage lending criteria as more homeowners struggle to keep up with their mortgage repayments
- Mortgage lenders plan to tighten their credit scoring criteria and reduce lending to people with smaller house deposits
- But interest rates for fixed mortgages are going down and have reached a six-month low, while there is a wide choice of available mortgage products
- The average cost of a five-year fixed rate mortgage is now 5.00%, down from 5.63% in January 2023
- The average cost of a two-year fixed rate mortgage is now 5.32%, down from 5.79% in January 2023
Selling this year? Then we’ve got some good news
If you're looking to sell a home that represents good value, then you're in demand. Homes that offer more bang for their buck are just what buyers are looking for right now.
House prices are still up 4% year on year and we’re expecting 500,000 home sales to go through in the first half of 2023.
The number of sales agreed is 11% higher than the number agreed in spring 2019 - and sales are on an upward trajectory.
Prices are down 1% from what they were in October 2022, but the housing market is faring much better than many predicted and the number of sales going through is starting to pick up.
There are now 65% more homes available for sale than there were this time last year. The average estate agent now has 25 homes available, compared to a low of 14 homes in spring 2022.
This means there’s much more choice for buyers - and we’re expecting at least a million home sales to go through in 2023.
If your home represents good value for money, then you’re in demand
Buyers with less spending power are looking for homes that offer more bang for their buck.
That means homes in the more affordable areas like Scotland, Wales, the North East of England and London are seeing plenty of demand.
And we’re expecting the popularity of inner London flats to see a resurgence this year - because of price stagnation since 2016 - they’re now representing good value for money.
Across all regions and countries of the UK, we’re seeing a 5% increase in the share of sales at the lower end of the market and a 4% decrease at the top end, clearly showing that buyers are currently more interested in homes at the more affordable end of the spectrum.
The top end of the London market is the only area bucking this national trend, with an increase in the share of sales in the top 20%.
If you live in an area that saw big gains during the pandemic (we’re talking the South West, South East and Midlands) then you may find it takes longer to sell, as these homes now need bigger mortgages from would-be buyers.
And 4% mortgage rates are currently reducing buying power by 20%, hence buyers are looking for cheaper properties.
How much are sellers cutting their asking prices by?
Sellers are making modest downward adjustments to their asking prices to ensure their pricing matches what buyers are prepared to pay.
The average seller discount at the moment is 4% or £14,000.
That said, the scale of price gains over the pandemic (where the average home value increased by £42,000) is giving sellers room for manoeuvre to make these adjustments so that they can continue with their moving plans.
How long does it take to sell a home in March 2023?
The average home is now taking 15 days longer to sell than in spring 2022, when we were in a red hot housing market.
However, homes in most areas are still selling faster right now than they did in spring 2019.
Scotland has the shortest sales period at 28 days (where homes are marketed with a survey and valuation in place), and London has the longest time to sell at 44 days.
Why buyers are still motivated to move in 2023
Hybrid working between the home and office is becoming the norm for many office workers.
And that freedom is still opening up the buying landscape for many, allowing them to look further afield for a home that’s better value for money.
A spike in retirement caused by the pandemic is also continuing to be a trigger for home moves.
Meanwhile, increasingly high rents are pushing some renters to become first-time buyers.
And finally, cost-of-living pressures will encourage some movers to down-trade from larger homes that are expensive to run to more affordable properties.
How is the rest of 2023 looking for the housing market?
The market is going through a soft repricing process with modest quarter-on-quarter price falls across all regions and countries of the UK.
But the good news is that buyers and sellers are continuing to agree deals and there’s little evidence to suggest house prices and transaction volumes are going to suddenly drop lower.
The most affordable markets will continue to attract demand and see above-average levels of sales.
The onus on all sellers is to make sure pricing aligns with buyers' expectations. If you are serious about moving, you simply cannot afford to over-price your home.
Mortgage rates are set to remain around 4% over much of 2023 and could move lower towards the end of the year.
Key takeaways
- Demand for homes has reached its highest level since October 2022 and is 16% higher than spring 2019
- Demand from buyers is also above average in the most affordable areas, led by Scotland, Wales, the North East of England and London
- Mortgage rates are set to remain at around 4% for most of 2023 - and could move lower towards the end of the year
- Prices are adjusting lower but most homeowners looking to sell will still be making more from their home than 1-2 years ago
Where are house prices falling in the UK?
Seven local authority areas in the UK have seen an annual fall in house prices.
Houses across the UK are now selling at an average price of £259,700, 1% less than in October 2022.
UK-wide annual house price growth has dropped to 4.1%, but a few locations are already seeing annual price falls: expensive London boroughs and the east coast of Scotland.
We’ll reveal the locations in the UK where house prices are falling and rising, plus the cheapest and most expensive places to buy a home on average right now.
Having said that, we know averages aren’t going to cut it when it comes to your home.
The UK locations where house prices are falling
Four parts of London have registered a fall in average house prices since this time last year.
Homes in Westminster are selling for £12,170 less than a year ago on average (-1.2%), while properties in Kensington and Chelsea have lost an average of £6,220 (-0.5%).
House prices have fallen slightly in Hammersmith and Fulham (-0.1%) and Tower Hamlets (-0.1%), taking £550 and £350 off the average sale price respectively.
Meanwhile, Islington, Camden and Wandsworth have seen house prices rise less than 1% in the last year.
London is feeling the impact of increased mortgage rates due to its higher house prices, which is impacting buyer demand and causing price growth to stagnate or fall into reverse.
The only other places in the country where house prices are already falling year-on-year are on the east coast of Scotland: Aberdeen (-1.1%), Aberdeenshire (-0.2%) and Moray (-0.2%).
A lack of investment in the North Sea’s oil industry in recent years is having a knock-on effect on local employment and reducing demand for property on the Scottish east coast.
Here are the sevens places where house prices are falling, along with the locations seeing the lowest annual house price growth.
| Local authority area | Average house price | Annual price change (%) | Annual price change (£) |
|---|---|---|---|
| City of Westminster | £962,600 | -1.2% | -£12,170 |
| Aberdeen | £140,000 | -1.1% | -£1,590 |
| Kensington and Chelsea | £1,189,400 | -0.5% | -£6,220 |
| Moray | £168,700 | -0.3% | -£560 |
| Aberdeenshire | £186,600 | -0.2% | -£350 |
| Hammersmith and Fulham | £731,100 | -0.1% | -£550 |
| Tower Hamlets | £482,100 | -0.1% | -£350 |
| Islington | £628,000 | 0.4% | £2,260 |
| Camden | £750,900 | 0.6% | £4,560 |
| Wandsworth | £655,500 | 0.7% | £4,660 |
Zoopla House Price Index, March 2023
The UK locations where house prices are rising the most
Areas in the North West and Wales are recording the strongest house price growth in the UK, with homeowners gaining more than 6% in sale prices year-on-year.
House prices have risen the most in four towns near Manchester - Oldham (+7.4%), Rochdale (+7.3%), Wigan (+7.1%) and Calderdale (+6.9%) - as buyers seek value for money and connections to large employment centres.
Homeowners in these areas can expect to see at least £10,000 added to their home’s sale price since February 2022.
Areas in South and West Wales have also enjoyed strong house price growth in the last year, with the biggest gains seen in Carmarthenshire (+6.8%), Neath Port Talbot (+6.7%) and Bridgend (+6.6%).
The Vale of Glamorgan has seen the biggest monetary gains with homeowners adding £17,360 (+6.3%) to their home’s sale price, while those in Pembrokeshire have seen a £13,920 rise (+6.5%) since February 2022.
| Local authority area | Average house price | Annual price change (%) | Annual price change (£) |
|---|---|---|---|
| Oldham | £171,900 | 7.4% | £11,820 |
| Rochdale | £163,700 | 7.3% | £11,070 |
| Wigan | £163,900 | 7.1% | £10,860 |
| Calderdale | £169,200 | 6.9% | £10,900 |
| Carmarthenshire | £199,000 | 6.8% | £12,650 |
| Neath Port Talbot | £151,000 | 6.7% | £9,480 |
| Bridgend | £192,100 | 6.6% | £11,870 |
| Pembrokeshire | £228,300 | 6.5% | £13,920 |
| Caerphilly | £174,100 | 6.4% | £10,410 |
| Vale of Glamorgan | £293,300 | 6.3% | £17,360 |
House Price Index, March 2023
The UK locations with the cheapest house prices
The cheapest areas to buy a home in the UK right now are all located in Scotland and the North of England.
The cheapest houses for sale in the UK are in rural areas to the east of Glasgow - Inverclyde, East Ayrshire and West Dunbartonshire - where house prices average less than £110,000.
In the North East, you can find cheap houses for less than £120,000 in Hartlepool, Hull, Middlesbrough and Sunderland.
And in the North West, the cheapest properties for sale are in Burnley, where the average home costs £116,600.
The prominence of Scottish regions is down to a greater balance between property and wage growth than the rest of the UK.
"Scotland dominates the most affordable areas list, with modest pricing and stronger relative earnings making a home move more accessible for many,” says Izabella Lubowiecka, Researcher at Zoopla.
"For home movers on average salaries, mortgages are more affordable in these lower-value locations, especially if they have built up some equity in their current property.”
| Local authority area | Average house price | Annual price change (%) | Annual price change (£) |
|---|---|---|---|
| Inverclyde | £101,200 | 3.3% | £3,190 |
| East Ayrshire | £102,600 | 3.3% | £3,300 |
| West Dunbartonshire | £108,700 | 2.7% | £2,810 |
| Hartlepool | £110,500 | 3.7% | £3,930 |
| North Ayrshire | £111,200 | 3.0% | £3,220 |
| Hull | £112,000 | 2.5% | £2,750 |
| Middlesbrough | £113,900 | 3.7% | £4,110 |
| Burnley | £116,600 | 3.3% | £3,720 |
| North Lanarkshire | £117,600 | 3.9% | £4,380 |
| Sunderland | £117,700 | 2.4% | £2,810 |
House Price Index, March 2023
Where are the most expensive house prices in the UK?
When it comes to the most expensive places to buy a home, it’s all about London and the South East.
Kensington and Chelsea is the only place where the average house price pips the £1 million mark, but houses are selling for £6,220 less than a year ago on average.
The City of Westminster is a clear second place at £962,600 despite a £12,170 annual drop in sold prices.
House prices in Richmond, Camden, Hammersmith and Fulham, and Elmbridge all sit above £700,000 but price growth is low or negative.
Stretched affordability in London is limiting the scope for price growth and we’re expecting price falls of around 5% to 8% by the end of 2023. This will improve affordability and support a future rebound in inner London markets.
| Local authority area | Average house price | Annual price change (%) | Annual price change (£) |
|---|---|---|---|
| Kensington and Chelsea | £1,189,400 | -0.5% | -£6,220 |
| City of Westminster | £962,600 | -1.2% | -£12,170 |
| Richmond upon Thames | £764,600 | 1.2% | £9,430 |
| Camden | £750,900 | 0.6% | £4,560 |
| Hammersmith and Fulham | £731,100 | -0.1% | -£550 |
| Elmbridge | £720,200 | 1.8% | £12,710 |
| South Buckinghamshire | £680,100 | 2.4% | £15,620 |
| Wandsworth | £655,500 | 0.7% | £4,660 |
| Chiltern | £654,300 | 2.3% | £14,640 |
| Islington | £628,000 | 0.4% | £2,260 |
House Price Index, March 2023
Key takeaways
- The UK’s average house price is now £259,700 as house prices fall 1% since October and annual price growth drops to 4.1%
- There are seven local authority areas in the country where house prices are already falling year-on-year - four London boroughs and three areas on the east coast of Scotland
- All other areas in the UK continue to see low annual house price growth, with towns on the outskirts of Manchester and areas in Wales faring the best
Property sales rise as buyers regain confidence
With steadying mortgage rates and 65% more homes for sale than this time last year, buyers are back in the market and agreeing 11% more sales than in 2019.
Increasing sales volumes indicate recovering market health
The housing market is continuing to see cautious improvements in conditions since the mini budget in October 2022.
Sales volumes are on an upward trajectory while the demand for homes has reached the highest level since last October in recent weeks.
The number of agreed sales is now 11% higher than in 2019, while demand from buyers sits 16% and homes are selling more quickly across most regions of the UK.
While these measures are tracking lower than this time last year, the return of more ‘normal’ market conditions in recent months makes 2019 a more relevant benchmark of activity than the pandemic housing boom of 2020 to mid-2022.
Second-steppers in favourable position to upsize
Homeowners looking to upsize are enjoying a favourable position thanks to greater demand at the lower end of the market along with more choice of their next property and repricing at the upper end of the market.
There’s been a clear shift in the proportion of homes selling across the UK, with properties in the cheapest 40% of the market agreeing 5% more sales. Meanwhile, houses in the most expensive 40% have seen a 4% drop in agreed sales.
There are 65% more homes for sale than a year ago with the average estate agent listing 25 available homes for sale compared to the low of 14 last year.
This is seeing sales agreed at 4% lower than asking price - or £14,000 on average - which equates to the greatest savings on higher-priced properties.
What’s more, the rapid 11% rise in rental rates in the last year is continuing to support demand from first time buyers, who accounted for 1 in 3 sales last year.
These trends are coming together to give homeowners at the lower end of the market confidence in the sale of their current home, along with more choice, time and bargaining power in their next purchase.
However, upsizing will come with the consideration of higher mortgage costs. We expect more people to proceed with their move as the economic outlook becomes clearer and UK-wide house prices start to register small annual falls this summer.
First time buyers look to escape rising rents
The rapid pace of rental inflation - up 11% in the last year - is encouraging an increasing number of renters to become owners, despite the challenge of getting a deposit together.
We expect this to hold up this year as rental growth shows no sign of slowing and mortgage rates remain below rental costs in many regions - even with current 4% mortgage rates limiting buyer power by up to 20% compared to last year.
Buyers finding value in affordable regions and some pockets of London
More affordable areas are seeing the highest demand as the market adjusts to higher mortgage rates.
The highest levels of demand are from buyers in Scotland, Wales, the North East of England and London.
Buyers are generally less keen to move in regions where prices increased the most during the pandemic and where higher mortgage rates therefore have the biggest impact - across the South of England and the Midlands.
Rebalancing of house prices set to support activity across the housing market in 2023
Rising house prices are often associated with market health but we believe the current repricing will support activity from all segments of the housing market as we look to the end of 2023 and into 2024.
The highest prices we saw in mid-2022 simply aren’t sustainable with the mortgage rates now available, so the natural tip back towards what buyers can realistically afford with a 4% mortgage rate will encourage more back into the market.
We expect 1 million sales in 2023 with 5% house price falls in localised areas, but sellers’ concerns will be somewhat alleviated by an average gain of £19,000 to their home’s value in 2022.
Key takeaways
- Increasing sales volumes indicate recovering market health with 11% more agreed sales than in 2019
- Second-steppers in favourable position with highest demand at cheaper end of the market plus more choice, time and bargaining power with their next purchase
- Widespread repricing of homes set to tempt more buyers this summer while sellers’ concerns are alleviated by an average £19,000 gain in home values in 2022