Property sales are falling through at the fastest rate since the Covid-19 housing market shut down because of soaring mortgage rates.
The share of agreed sales collapsing before completion jumped to 29.3pc in September, up from 27pc in August, according to TwentyCi, a data company.
This was the highest level recorded since April and May 2020, during the first Covid lockdown, when home moves were effectively banned. Collapsing sales are 16pc higher than in September 2019, before the pandemic began.
In the week ending October 2, fall-throughs jumped nationally by 7pc compared to the two weeks ending September 18, according to analysis by Lucian Cook, of Savills estate agents.
The number of unsold properties which had changed asking price also jumped 14.1pc. These changes will almost certainly be price cuts, Mr Cook said.
Markets panicked at the prospect of higher inflation, which has sent expectations for interest rates soaring.
In turn, this made fixed-rate mortgage deals almost impossible to price, which meant lenders withdrew almost half of all deals from the market.
They are now bringing them back slowly at much higher prices. In the two weeks since the mini-Budget, the average rate on a two-year fix has jumped from 4.74pc to 6.11pc – a 14-year high.
Mr Cook said, despite the number of collapsing sales, buyers had remained committed to their purchases in most cases.
This is because lenders are largely bound by contract to proceed with mortgage offers that are already in place. It is only buyers who had agreed sales but did not have offers in place who would have suddenly been left in the lurch and facing higher rates.
Buyers who have mortgage offers are highly motivated to press ahead before rate rises price them out of the market.
Mr Cook said: “Buyers already locked into a mortgage deal have been keen to proceed at much lower mortgage rates than are now available.”
But experts warned sellers are coming to terms with the fact that new buyers entering the market now will be paying much higher rates and will therefore have less money to spend.
“We have seen a much bigger increase in price adjustments to unsold stock. This reflects the fact that sellers have been ready to adjust their price expectations to reflect a higher interest rate environment and reduced buying power, irrespective of the stamp duty giveaway,” Mr Cook said.