Three in five UK homes unsold as high mortgage rates deter buyers
The UK property market is stalling under the weight of elevated borrowing costs, offering a stark example of how geopolitical shocks are freezing European consumer mobility.
Three in five homes listed for sale in the UK since January remain unsold, according to property portal Zoopla, as elevated mortgage rates crush buyer demand. Agreed sales have fallen 7% compared to last year, dropping to a two-and-a-half-year low for mortgage approvals in May.
The sudden stall demonstrates how geopolitical turbulence can rapidly transmit to domestic retail finance. The financial fallout from the US-Israeli war with Iran pushed the average two-year fixed mortgage rate from 4.83% in early March to a peak of 5.90% on 12 April, data from Moneyfacts shows.
This surge added an average of £125 a month to a typical mortgage, severely testing first-time buyers. The impact was highly regional: costs for first-time buyers in London jumped by £232 a month, compared to just £66 in north east England. Consequently, two-thirds of one and two-bedroom flats listed this year remain unsold, while larger homes continued to sell at a normal pace.
For the broader European economy, a frozen UK housing market signals dampened consumer spending. Lucian Cook, head of residential research at Savills, noted that general economic uncertainty is compounding the rate shock. "Clearly, if people are concerned about their personal finances, then they're less likely to move," he said.
Supply-side shifts are also distorting the market. Cook pointed to recent regulatory reforms in the private rented sector, which have prompted landlords to sell up and increase housing stock. At the upper end of the market, anxiety over potential tax changes is further chilling activity.
Rates have since eased to 5.54% as lender competition increases, offering a tentative path forward. "For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate," said Richard Donnell, executive director at Zoopla. "If you are ready to move, conditions are more favourable than they were three months ago."
Estate agents report that while the market is slow, it is not entirely broken. "Sales are taking much longer and it is proving increasingly difficult to generate commitment," said Jeremy Leaf, an estate agent in north London. "However, the overwhelming majority of sales which have been agreed are proceeding, although inevitably more slowly."
