The spike in mortgage rates after the mini-Budget in late September has led to a “sharp reduction” in housing market activity, the latest Zoopla House Price Index has stated.

This trend is more more pronounced in new buyer demand than sales agreed.

Zoopla’s analysis has indicated that demand has fallen to levels normally associated with Christmas as new buyers sit on the side-lines, watching the outlook for mortgage rates and what the economic headwinds means for jobs and incomes. New buyer demand is almost half the level it was a year ago when market conditions were stronger, mortgage rates lower and there were fewer cost-of-living pressures on household budgets.

In terms of new sales, Zoopla said they are still being agreed by those with mortgage offers and the motivation to move, which includes would-be first-time buyers facing steep rent rises and older households less reliant on mortgage finance to fund a move. However, sales volumes are down 28% from a year ago and on par with the pre-pandemic period

Zoopla also stated that sales volumes are down by almost half in areas where market conditions have been strongest in the last year and where higher borrowing costs are hitting demand. This is typically the mid to upper price bands in southern England, excluding London, in the East Midlands and also in Wales.

The decline in sales volumes has been smaller in more affordable markets, such as Scotland and the North East.

Furthermore, sales in London are also holding up better than the national average, but Zoopla added that the capital’s housing market has been far more subdued, lagging behind the rest of the UK.

“We still expect house price falls of up to 5% in 2023 with one million sales and mortgage rates dipping below 5%,” said Zoopla executive director of research, Richard Donnell. “But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors.”

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