HOMEBUYERS are haggling to get cheaper house prices amid interest rate rise and mortgage borrowing fears.
Mortgage interest rates have risen to a maximum of 6%, with lenders pulling fixed rate deals or increasing rates.
Over 1,000 mortgages have now been pulled from the market.
According to MoneyFacts, 935 deals were pulled on Tuesday and a further 321 yesterday.
That means a total of 1,621 mortgages have disappeared since the turmoil started.
But lenders are already returning to the market with rates that have surpassed 6%, brokers say.
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Buyers have been using the chaos to negotiate down house prices over fears they won’t be able to pay as much in interest if rates go up, according to estate agents.
Graham Cox, director at SelfEmployedMortgageHub.com, according to the inewspaper, said: “I’ve just had a client tell me this morning that they’ve managed to negotiate £13,000 off the asking price of £535,000 on a very nice property in South West London.
“It’s a buyer’s market now. The pendulum has finally swung.”
Nick Morrey, technical director at mortgage broker Coreco said: “It is not surprising that when the cost of borrowing for mortgages is increasing rapidly, buyers feel the need to negotiate an agreed price downwards to enable hem to complete on the transaction.”
Nathan Emerson, chief executive of Propertymark said: “Fall throughs or re-negotiations could start to emerge over the next three to six months.”
According to Nathan the average time taken in the legal process to purchase a house is 17 weeks.
And with most mortgage offers locked-in for three months – if an offer expires during the time it takes to legally purchase a home, buyers could be faced with higher monthly payments than they had originally signed up to.
This could drive buyers to re-negotiate on their offers – and in the worst case scenario many sales could fall through.
Aneisha Beveridge, at Hamptons, said: “If mortgage rates surpass the 5% mark across the board, there’s a much stronger likelihood that house prices will fall.”
Jonathan Rolande of the National Association for Property Buyers said that the “self-inflicted” market chaos still won’t prevent people from moving home – it’ll just make it more costly for both buyers and sellers.
Mortgage experts are still concerned that house prices could fall – but not by as much as previously feared.
Ben Thompson of the Mortgage Advice Bureau said: “The most likely scenario as things look today, is that demand falls back from current levels and we do see a flattening off in house prices from now onwards, and probably single digit falls on and off for a few months.”
Nathan Emerson said: ” Over a period of months, a trend of re-negotiation would start to soften house prices as those final sale prices are used by agents to create comparable evidence for the valuing of new properties entering the market.
“The potential for a softening of prices isn’t as terrifying as it sounds if we remember that prices have inflated by nearly 20% over the last two years.”
Some estate agents aren’t too concerned about the impact of rising mortgage rates.
Helena Marston, chief executive of Purplebricks said: “We’re confident any impact on mortgage availability is likely to be short term.”
Mortgage rates were already rising partly due to soaring inflation and frequent rises to the Bank of England’s base rate.
The BoE raised interest rates by half a percentage point to 2.25% for the seventh time in a row last Thursday.
And any increase to the base rate of interest makes borrowing more expensive.
A swathe of tax cuts promised in the Mini-Budget spooked the market, with lenders withdrawing mortgage products from sale.
At the same time, a plummeting pound fuelled concerns of an emergency interest rate rise.
Experts warned that if rates did jump, the average mortgage bill would increase by £7,300 a year.
According to MoneyFacts, the average two year fixed mortgage rate has more than doubled since September 2021.
And in the last two days alone some providers have upped their rates considerably.
David Hollingworth of L&C Mortgages said that a number of providers are already offered fixed deals at more than 6%.
For example, Nationwide now offers a two year fixed mortgage at a LTV of 95% at 6.09% with a £999 fee.
As homeowners will have to fork out thousands of pounds extra a year to pay their mortgage if interest rates continue to rise — many could be put off moving.
A fall in demand tends to lead to a natural fall in house prices.
So it’s bad new for sellers as they could be forced into lowering their asking prices if demand falls.
And Credit Suisse warned on Wednesday that house prices could “easily collapse by ten to 15%” if borrowing costs continue to rise.
However, some mortgage experts including Nick Morrey of Coreco argue that because the UK has a low supply of housing, predictions that house prices may collapse by 15% should be taken with a pinch of salt.
Rising home loan rates amid the cost of living crisis has caused some experts to warn of a “ticking timebomb” for mortgages.
This is because 1.8million households are due to finished fixed rate deals in the next year.
There are some concerns that rising mortgage rates and a higher cost of living generally will make it harder to get a mortgage as affordability will drop.
The Sun first warned about this on our Sun Money pages earlier this month.
Some homeowners have been considering refixing deals early – even though they have to pay an extra fee.
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Today, Martin Lewis echoed that warning saying that those with deals coming to an end in the next three to five months need to take action now.
Households can usually secure a deal up to six months before their current one ends.
