(Bloomberg) -- Britain’s home sellers cut the prices they’re asking for properties for the first time this year as uncertainty around the election and stubbornly high mortgage rates held back confidence.
Property website Rightmove said on Monday that average asking prices by sellers fell 0.4% in July to £373,493, the first drop since December.
With interest rates stuck at a 16-year high and Bank of England officials warning about lingering signs of inflation, a budding recovery in house prices ran out of steam in the past few months. A snap election that culminated on July 4 may have also made many home movers more cautious.
Mortgage rates have crept higher since January as the BOE pushed back plans to cut interest rates. While traders put the odds of a reduction next month near 50/50, they’re expecting a more gradual loosening by the central bank than at the start of the year.
Tim Bannister, Rightmove’s director of property science, said that a first rate cut since the start of the pandemic and political certainty following the election “could set the scene for a positive autumn market.”
“A base rate cut is expected to lead to lower mortgage rates, which could be the game-changer for some would-be home-movers who are being held back by significantly higher monthly mortgage costs,” he said.
Despite the dip in asking prices, home sales were still up 15% on a year earlier, when mortgage costs were around their peak.
While mortgage rates are lower than the 15-year high hit a year ago, they remain at painfully high levels for home buyers. Data from Moneyfacts shows that the average 2-year fixed mortgage rate has crept up from around 5.5% in January to 5.92%.
The high borrowing costs is leading to more homeowners defaulting on their mortgages. Data from the BOE on Thursday showed that banks expect default rates to rise in the third quarter by the most in a year.
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