The latest reading from property portal Zoopla has shown that higher-than-average mortgage rates and stamp duty are behind falling prices in the capital.
During March, house prices in London fell by 0.4 per cent on a year-on-year basis to £535,700.
London buyers are seeing the highest average difference in annual mortgage repayments, rising £7,500 since 2021, the leading property site has warned.
Property owners in London are paying 48 per cent more than what they paid three years ago on their mortgage, with the average household contributing over £23,000 to payments.
Zoopla said the housing market is continuing to adjust to the ending of ultra low mortgage rates since 2022.
It said: “Mortgage rates spiked twice in the last two years, at the end of 2022 and over the summer of 2023, as interest rates increased to combat rising inflation.”
“The primary impact on the housing market was a 23 per cent drop in sales over 2023 and modest house price falls, which did very little to help reset housing affordability.”
While falling briefly towards the end of the year, mortgage deals have been on the risen again over the past few months.
According to Moneyfacts Daily the average two-year fixed residential mortgage rate was 5.87 per cent on Friday. This is up from an average rate of 5.85 per cent on the previous working day.
Despite deals increasing and interest rates held at record highs, Britain’s housing market has shown signs of recovery this year.
Zoopla predicts the market is on track for 1.1 million sales in 2024, a 10 per cent rise on last year.
Richard Donnell, executive director at Zoopla said: “There is clear evidence that house prices are firming and the pace of price falls is slowing. We don’t believe that prices will start to rise as buyers face much higher mortgage repayments than in the recent past.
“The market is adjusting to higher borrowing costs and what we need is continued price stability which will create the environment for continued growth in sales and home moves. It’s important sellers remain realistic on what they can achieve for their home.”