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UK house sales fall in slowing market but mortgages to become more expensive

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House prices: Sales last month were down were 12.1% on April 2021. Photo: Getty
House prices: Sales last month were down were 12.1% on April 2021. Photo: Getty

Britain's property market boom is showing signs of cooling as house sales fell slightly in April, with experts warning mortgage prices could surge and deter first-time buyers amid rising inflation.

Figures from HM Revenue and Customs (HMRC) show there were 106,780 transactions last month, down 3.9% from March.

The seasonally-adjusted sales last month were 12.1% lower than April 2021 when the stamp duty holiday was still in full swing.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "The vertiginous peaks and troughs in house sales have started to level out, and while they’re still at a higher altitude than before the pandemic, it raises the question as to whether we’re heading for lower ground as the market starts to slow."

However, despite the drop in sales, transactions were ahead of pre-COVID levels in 2018 and 2019, suggesting the market remains supercharged despite inflationary pressures.

"A fall in property transactions won’t come as a shock when the whole of the UK is dealing with 40-year-high inflation rates and a cost of living crisis," said Chris Hutcinson, CEO of Canopy. "It’s no wonder adults are struggling to prepare to purchase property as they adapt their spending habits, all the while ensuring a good level of financial fitness."

Read more: UK house prices hit a new record as mortgages outpace rents

He warned mortgage prices will "continue to increase and push potential first-time buyers" out of the market as inflation rates are expected to hit double figures later this year.

Stuart Wilson, CEO at Air Group, said: "The mood music around the property market has certainly shifted in the last week or so, with swirling speculation around a dip in activity and average house prices as the cost of living crunch presses on.

"April brought hikes to the energy price cap, national insurance contributions, and council tax bills — all three of which are likely to have seen people tighten their belts and dented future purchase plans.

"However, with the property market having enjoyed strong growth over the last few years — thanks in part to the stamp duty holiday — older homeowners do have wealth tied up in their property that they can fall back on."

A separate analysis suggests asking prices for UK properties rose to a new record for a fourth-straight month, though there are signs the market is starting to ease.

Read more: House prices double around new Elizabeth Line stations

Rightmove (RMV.L) said the price sellers are seeking when putting homes on the market rose 2.1% in May to a record high of £367,501. This marks a £55,551 jump since the housing market was halted at the start of the pandemic, almost 10 times the £6,218 increase in the two years before.

The fourth successive interest rate rise by the Bank of England to rein in inflation has been costly for mortgage owners, who are now paying more than tenants.

In May, average monthly mortgage payments of £901 overtook the cost of rent, which stood at £887, according to Rightmove.

Watch: Will UK house prices ever fall?

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