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Interest rates blamed for plunging property transactions as UK housing market cools

UK property transactions London- Terraced residential houses in Fulham SW6 area of south west London
UK property transactions are down as mortgage interest rates remain high. Photo: PA/Alamy (William Barton)

UK property transactions fell 17% in October as high interest rates are making it harder to climb the property ladder.

There were 90,920 UK residential transactions in October, which is 2% lower than in September and 17% lower than October 2022, according to the latest figures from HM Revenue & Customs (HMRC).

Looking at the same data on a seasonally adjusted basis, HMRC said that transactions there were 82,910 transactions in October 2023 which is 21% lower than October 2022 and 3% lower than September 2023.

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, said the fall in housing transaction is not surprising.

“Firstly, we are still coming down from a bubble caused by COVID and stamp duty reductions, which created double-digit house price growth for much of the past three years,” she said.

“Secondly, the higher base rate is designed to cool demand and therefore pricing in the economy, and it is working to plan.

Read more: What is gazundering and how can sellers protect themselves from it?

“Sentiment is subdued across the property market. However, for investors it’s a time of opportunity since rental demand has never been stronger, and it is a good time to negotiate on purchase price,” she added.

Ben Waugh, managing director at more2life, said that “another dip” in property transactions is “likely to cause some concern” but there were some green shoots.

“We must keep in mind that this is a reflection of the ongoing cost of living crisis and economic uncertainty. Looking ahead, there may be some green shoots for aspiring homeowners, with interest rates stabilising and inflation slowing,” he said.

The Bank of England chose to keep the base interest rate at 5.25% in November for the second time in a row following 14 consecutive rate increases.

Read more: UK houses selling at a £25k discount in London and £18k lower in rest of the country

The BoE’s decision to pause interest rate hikes has given some temporary relief to more than 1.4 million UK homeowners on tracker and standard variable rate (SVR) deals that usually see an immediate change in their monthly payments.

It has also given lenders some confidence to lower mortgage rates, with the latest rates hovering around 5%.

Watch: Bank of England governor dismisses prospect of interest rate cuts

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