Of the sales that failed, 25% fell through because the buyer struggled to secure mortgage finance, suggesting that lenders are beginning to show more caution in light of rising interest rates and living costs.
Danny Luke, Quick Move Now’s managing director, says: “Property prices have been climbing and climbing in recent months. At the same time, the UK has been experiencing a steep rise in inflation and lots of people are beginning to really feel the pinch from steep rises in the cost of living. It was inevitable that the squeeze on people’s wallets would begin to be reflected in mortgage companies’ affordability assessments.
"From our conversations with potential buyers and estate agents, it is clear that lenders are being more cautious about which properties they’re prepared to lend on and how much home buyers can afford to borrow in light of rising day-to-day living costs. Energy prices have already risen by 50% for most UK households, and they look set to increase even further through the latter half of this year and into 2023. That, of course, has a significant impact on homeowner affordability.”
It seems it’s not just lenders that are feeling cautious. Other reasons for failed property sales in the first quarter of this year included:
Buyer changed their mind about the property (34% of failed sales)
The seller pulled out of the sale due to slow progress (25% of failed sales)
The buyer attempted to renegotiate the agreed sale price (8% of failed sales)
A change to the buyer’s circumstances meant they could not proceed with the purchase (8% of failed sales)
Danny concludes: “The property market has defied many predictions over the last two years, remaining buoyant and thriving despite challenging external conditions. Demand has remained strong since the end of the stamp duty holiday, and a shortage of properties coming to the market has led to exponential house price growth. However, both buyers and sellers are beginning to show more caution. Steeply rising living costs and worries about future financial security will undoubtedly impact buyer confidence.
"It’s little surprise that 34% of failed sales are attributed to the buyer changing their mind about a property after agreeing on a sale. There is such stiff competition for properties at the moment, that it’s easy for buyers to be pressurised into agreeing to a higher purchase price than they’re comfortable with, in order to secure a property. A few weeks in, when the sale really begins progressing, it’s understandable that buyers might start to get cold feet about the agreed sale price – which accounts for 8% of failed sales – or pull out of the purchase altogether.
“Sellers also seem concerned that the current property bubble is unsustainable. 25% of failed sales since the start of 2022 have been a result of the seller pulling out of the sale due to slow progress. Sellers are keen to lock in the sale of their property before demand or prices begin to dwindle.”
