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Wales now ‘particularly vulnerable’ to house price collapse warns estate agents as mortgage rates set to surge

29 Sep 2022 4 minute read
A couple standing outside an estate agent’s window. Tim Ireland / PA Wire

Wales is now particularly vulnerable to a collapse in house prices due to surging mortgage rates, a prominent real estate company has warned.

Zoopla said that nations and regions that had seen a big rise in prices during the pandemic could now see the biggest fall. Wales was the part of the UK that had seen the highest price rises of all during the pandemic – of 27%.

But London and the South East of England will be the worst hit, because house prices are most out of kilter with wages and the market is therefore most dependent on borrowing, they said..

Yesterday saw a record drop in the choice of home loan products as the economic fallout from Friday’s mini-budget continues. Rising interest rates by the Bank of England to bring down inflation has impacted on mortgage payments for homeowners.

But while house prices in Wales may fall, rising interest rates will still put mortgages beyond the reach of many buyers. The interest rate could hit 5.75% next year, driving the average mortgage rates to 6%, which would put mortgages at their most expensive since the early 90s.

Buyers will be able to borrow 28% less on average, leading to a collapse in house prices by a similar amount, according to Zoopla.

They said the number of homes selling below asking price had already hit a three-year high.

“Rising mortgage rates are set to have the biggest impact on areas where homes are already at the higher end of the market, or where house prices have surged over the pandemic,” Nic Hopkirk of Zoopla said.

“Our research shows that higher mortgage rates will reduce buying power by as much as 28% as rates rise from 2% to 5%. That’s if buyers want to keep their monthly mortgage payments the same.

“And the impact of this is likely to last into 2023.”


On Tuesday the Welsh Government announced that people buying homes in Wales for less than £225,000 would pay no tax, in order to offset rising mortgage rates.

“This is a change tailored to the unique needs of the housing market in Wales and contributes to our wider vision of a fairer tax system,” said Minister for Finance and Local Government Rebecca Evans.

“61% of homebuyers will not pay tax on their purchase. These changes will get support to people who need it and help with the impact of rising interest rates.

“We also know that helping people at the lower end of the market will have a particular benefit for first time buyers. We help people buy their first home in a number of different ways, including shared ownership and help to buy schemes, and I am pleased to be able to extend that support through these changes to Land Transaction Tax.”

The threshold for paying Land Transaction Tax is being increased from £180,000 and the change will come into force from October 10.

There will also be a small increase in the rate of Land Transaction Tax for homes that cost more than £345,000.

The move is intended to ensure that the threshold for paying tax reflects the rise in prices of homes over the last two years.

People buying homes under £225,000 will not pay any Land Transaction Tax.

Anyone buying a home costing less than £345,000 will see a reduction in the tax they pay, up to a maximum of £1,575.

People buying homes worth more than £345,000 will see an increase – up to £550 – but these only represent around 15% of property transactions in Wales.

All other elements of Land Transaction Tax will remain unchanged, meaning there are no tax reductions provided to those purchasing second homes in Wales, unlike with stamp duty land tax in England.

The changes have been brought forward as a result of changes to stamp duty land tax (paid in England and Northern Ireland) announced by the UK Government in last week’s financial statement. The Welsh Government was considering making changes at its Budget later this year, but is making changes now to give clarity to the housing market.

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1 year ago

Housing is going to be an even bigger problem if we keep repeating the crazy cycle of misfiring government interference and lenders exploiting the market via interest rates. Right now the ultra competitive market that drove prices sky high is coming to a juddering halt. No bad thing in itself. However we now enter the phase of interest rates being jacked up and those families who just made it a year ago will now be wiped out financially. And some clever talking head calls it an “adjustment in the market”! The rented sector is no better. Just read elsewhere that… Read more »

NOT Grayham Jones
NOT Grayham Jones
1 year ago

This should be good news for all the people saying they cannot afford to buy in their local communities which has been a constant moan for years. I hear the claim about interest rates going up but see 10 yr fixes at 3.5% – yes a lot higher than before but for most of my life i have paid interest rates at 5-8% – it was 12% when i bought my first house- i know the last centuary so i do not buy this crying about interest rates being out of reach.

1 year ago

No point critisising or praising any one single factor as there are many impinging on this issue. When it comes to house purchase you have to take into account the size of the loan, the prevailing interest rate, any likely movements, and the ability to service that loan i.e income or other reserves. Today’s situation is characterised by a major imbalance between these factors so nothing looks like getting solved. And that’s before things like job stability are even taken into account. Under the Truss regime I don’t think anybody’s job is safe !

NOT Grayham Jones
NOT Grayham Jones
1 year ago
Reply to  hdavies15

You probably are right re the Truss regime but lets not worry i saw Keir Starmer 2 nights ago telling us all in 2 years time when he’s prime minister he will solve all our problems- You got to love politicians for the fantasy world they all live in. Maybe its an age thing but i do not believe a word any of them say anymore

1 year ago

How many times your salary was your first mortgage? What was the average salary to average house price then? Today it’s something like 12 times the average salary. It’s obscene.

NOT Grayham Jones
NOT Grayham Jones
1 year ago
Reply to  Arwyn

I know prices are off the scale now but im not sure about 12 times average salary for a first time house. My first house cost £44k and i was earning about £10k at the time so yes only 3.5 times salary which was the max at that time- however the interest rate was about 12% so i was paying about £460 a month – my take home was about £800 so a massive commitment. So basically nothing has really changed – its not all about the actual price of a house.

Peter Cuthbert
Peter Cuthbert
1 year ago

I woud agree with the majority of the posters below. However, thinking about the comments about help for first time buyers, is it not likely that the fall in the price of houses will be asymetric? Cheaper houses will probably hold up in price as the help will mean that people will still try to buy. The more expensive houses that would probably be the target of ‘mid life movers’ will probably fall as suggested as they will feel the squeeze and get no help. No doubt the expensive sector will probably not move that much unless buyers in that… Read more »

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