House prices rise as lower mortgage rates buoy buyer demand and second home owners sell up

Lower mortgage rates helped buoy buyer demand and property sales last month leading to house price rises, new data from Zoopla shows. 

But buyers remain ‘price-sensitive’ and 37 per cent of recently agreed sales were agreed at more than 5 per cent below the initial asking price.

With council tax changes looming in certain locations for second homes, the number of homes listed for sale in places like Truro, Torquay and Bournemouth rose over 40 per cent when compared to the average for September in the last seven years, Zoopla added. 

House prices went up by 0.7 per cent in the year to August, up from -0.3 per cent at the same point a year ago. 

Annually, Northern Ireland and Scotland saw the biggest spike in property prices, while those in the South East of England, the East of England and the South West  slipped. 

Mortgage rate falls help drive demand 

Buyer demand was 26 per cent higher last month than a year earlier, Zoopla’s latest UK House Price Index reveals. 

Richard Donnell, executive director of research at Zoopla, said: ‘Home buyers are benefiting from the lowest average mortgage rates for 15 months.

‘This is supporting double-digit growth in all the key measures of sales market activity. Annual house price inflation is positive, but remains below 1 per cent’. 

According to Zoopla, the average mortgage rate for a five-year 75 per cent loan-to-value deal is 4.3 per cent, against 5.5 per cent a year ago, and the lowest since May 2023. 

Zoopla said: ‘Intense competition amongst lenders ensures attractive rates for buyers, especially for those with larger amounts of equity. 

‘Rising sales volumes are being supported by more homes available for sale, up 12 per cent on this time last year.’ 

The number of sales agreed was 25 per cent higher last month than a year ago, the data suggests, with large spikes seen across the East Midlands and North East. 

Buyers are also being drawn to the market as more homes are listed – including by second home owners keen to avoid new council tax rules, and landlords who are expecting capital gains tax changes in the upcoming Budget. 

It added: ‘A fifth of homes currently for sale were previously on the market over the last two years. While market conditions are improving, setting the right price is important to attract buyers. The same applies to the fifth of homes for sale that have been on the market for more than six months.

‘Sellers need to price sensibly to secure a sale’. 

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House prices still rising – but buyers cautious

The latest data from Zoopla suggests property prices increased by 0.7 per cent in the year to September, up from -0.3 per cent a year ago. 

Affordability remained a ‘constraint on house price growth’, particularly in southern England, Zoopla said. 

In the South West, South East and East of England, property prices were lower last month than at the same point a year ago. 

At the other end of the spectrum, Northern Ireland saw prices rise by 5.7 per cent on a year ago, having previously underperformed the rest of the market. 

Turning to house price growth in cities, Belfast saw property prices rise by 5.1 per cent to an average of £178,200 in the last year. 

Manchester, Liverpool, Glasgow and Leeds saw growth of 2.3 per cent, 2 per cent, 1.9 per cent and 1.7 per cent respectively. 

However, Cambridge. Aberdeen and Portsmouth saw their average property prices fall by 0.1 per cent, 1 per cent and 1 per cent respectively in the last year, Zoopla said. 

Budget tax changes lead to caution

Speculation is rife that Rachel Reeves could hike capital gains tax in the Autumn Budget later this month. As more investors and second home owners sell up, the number of properties listed is rising. 

Zoopla said: ‘Higher mortgage rates have forced some landlords into selling, with 13 per cent of homes for sale being previously rented.

‘Most of these (53 per cent) are in London and the South East, where modest yields, higher mortgage rates and low house price growth impacted returns for investors over recent years’.

Looming council tax changes for second homes appear to be having a sizeable impact on the number of properties being listed in certain areas.       

From April 2025, some second home owners in England could face paying twice the amount of second home council tax thanks to a new law. 

Taking one example, from 1 April 2025, Cornwall Council will charge a 100 per cent premium on council tax for second homes. 

Not all councils are adopting the plans, and in some cases, certain exemptions will be available. 

The number of homes listed for sale in locations like Truro, Torquay, Exeter, Lincoln and Bournemouth has increased by over 40 per cent when compared to the average for September in the last seven years, Zoopla said. 

It added: ‘Annual house price growth is negative in these areas, with rising supply keeping prices in check’.   

Nigel Bishop, of Recoco Property Search, said: ‘Second homeowners and buy-to-let investors are facing drastic changes as some local authorities have or are going to start charging double council tax for properties that are left empty for more than a year. 

‘We are seeing more second homeowners contemplating if maintaining their holiday home remains a sound financial investment.’

What’s next for house prices?

‘Low single-digit’ property price inflation looks likely in the coming months, Zoopla said. 

It said there were ‘sufficient levels of market activity’ to keep attracting new buyers prepared to make offers on sensibly priced homes. 

While lower mortgage rates are helping to boost sales, Zoopla said the outlook for interest rates remained ‘far from certain’. 

It said: ‘Today’s fixed mortgage rates already reflect the extent to which financial markets expect UK interest rates to move lower in the next two to five years’.

Zoopla said it thinks mortgage rates will settle in ‘the high 3 per cent and low 4 per cent into 2025’. 

It added: The outlook is more positive than a year ago, but sellers need to manage their expectations on pricing if they are serious about agreeing a sale in a timely manner’.