"There’s no doubt that the market has started to cool since interest rates began to increase and we’ve seen a considerable reduction in buyer activity across almost every area of the UK market"
Since December 2021, the Bank of England has hiked rates eleven times to reach its current level of 4.25%.
The latest research by digital upfront property pack provider, Moverly, has revealed that yet another interest rate hike could further dampen property market activity, as the average number of monthly transactions seen across the UK property market has dipped by a quarter since interest rates first started to climb in December 2021 - climbing to a reduction of 40% in the worst hit areas of the market.
Moverly analysed property transaction levels since December 2021 and how the UK property market has performed when compared to the same time period prior to the Bank of England’s first interest rate hike.
The research shows that since the Bank of England made the decision to increase interest rates for the first time, an average of 72,785 have been sold each month across the UK market (Dec 21 to Nov 22 - latest available).
Over the same time period prior to this first interest rate hike (Dec 2020 to Nov 21), an average of 96,732 homes were sold on a monthly basis. This means that since interest rates started to rise, there have been 23,946 fewer homes sold on a monthly basis across the UK property market, a drop of a quarter (-24.8%).
Regionally, the South East has seen the largest decline, with the average number of homes sold each month falling by -30.2%. The South West (-29.9%) and East of England (-29.8%) have also seen some of the most drastic reductions in market activity, followed by London (-26.8%) and the East Midlands (-25.6%).
Scotland has seen the smallest reduction, although there has still been a drop of -10.6% in the average number of homes sold each month.
At local authority level, it’s Mid Suffolk that has seen the most drastic reduction in market activity since interest rates started to climb. The average number of monthly transactions seen across the Mid Suffolk property market has dipped by -40.1% since December 2021.
Other areas to make the top 10 include Uttlesford (-39.8%), West Oxfordshire (-39.7%), Maldon (-39.6%), Torridge (-39.2%), Harborough (-38.8%), Havering (-37.9%), Hambleton (-37.5%), Maidstone (-37.4%) and Test Valley (-37.1%).
Just two areas of the UK market have avoided a reduction in transactions since interest rates started to climb. Aberdeen (+2.4%) and Clackmannanshire (+1%) have both seen the average number of homes sold per month increase.
Ed Molyneux, Moverly co-founder commented: “There’s no doubt that the market has started to cool since interest rates began to increase and we’ve seen a considerable reduction in buyer activity across almost every area of the UK market.
"However, it’s rather telling that the most inflated regions of the property market have been worst affected, while Scotland has seen a far more measured reduction.
"This is down to the fact that buyers are contractually obliged to follow through with a property purchase far earlier in the transaction timeline north of the Scottish border. So the increasing cost of borrowing hasn’t caused the same level of market instability as it has in the likes of the South East, where buyers have struggled to secure a mortgage as rates have climbed.”
