Higher mortgage rates have been revealed to have replaced the so-called ‘race for space’ of the pandemic as the main reason homeowners are leaving London this year.

Londoners accounted for 7.7 percent of all non-capital shoppers in Britain during the first six months of this year, new Hamptons research shows.

The number is down from 7.9% in 2021 and 2022, but due to higher mortgage rates, it remains above the average of 6.9% between 2015 and 2019.

It supersedes the main reason during the pandemic when homeowners left the capital because they were looking for more space in a property trend known as the ‘race for space’.

Some buyers are looking outside the capital to buy a property amid higher mortgage costs

The findings follow another blow to mortgage holders when the Bank of England last week raised interest rates for the 14th time in a row.

Homeowners in the capital may be particularly affected by rate hikes as house prices tend to be higher and therefore may have a larger loan.

The Bank raised interest rates by 0.25 percent to a 15-year high of 5.25 percent, bringing them to their highest level since 2008.

Adding to the problems for mortgage holders, financial experts have warned that rates could rise as much as 6 percent over the next year.

The bank said rates were raised amid ongoing concerns that inflation is taking root in the UK economy.

Londoners bought 32,600 properties outside the capital in the first six months of this year

Mark Harris, of mortgage brokers SPF Private Clients, said: “With the ‘race for space’ that was a feature of the pandemic now all but exhausted, it appears that mortgage costs are now persuading some Londoners to abandon the capital”.

‘With 14 consecutive interest rate hikes in as many meetings, the days of lower mortgage rates are over.

‘Although there is hope that rates will stabilize again once the Bank of England has brought inflation under control, borrowers will have to get used to higher mortgage rates in the future and will need to budget accordingly.

“This may mean that people will have to take on smaller mortgages and opt for cheaper property outside the capital.”

A move to a more affordable area off the M25 is set to save a typical first time buyer a 15 per cent deposit £8,656 in mortgage payments each year.

Hamptons went on to say that first-time buyers, in particular, are feeling the pressure from higher rates.

He said this year they accounted for a record 30 per cent of shoppers moving from London to another part of Britain.

That’s an increase from 27 percent last year and more than double the 12 percent rate recorded a decade ago. It equaled 9,260 purchases during the first six months of this year.

While buyers overall are moving less far than last year, the average first-time buyer leaving London traveled 25 miles from where they lived, up from 23 miles last year and 14.3 miles in 2013.

With few able to afford to buy where they currently rent in the capital, this move to a more affordable area off the M25 is set to save a typical first-time buyer on a 15 per cent deposit £8,656 in mortgage payments each year.

As a result, so far this year, more than a third (37 per cent) of London-based first-time buyers have left the capital to buy a home.

It’s the second-highest figure, after 2018, since Hamptons records began in 2009.

This Hamptons chart reveals which Londoners are buying homes outside of the capital

In total, Londoners bought 32,600 properties outside the capital during the first six months of this year.

A broader slowdown in the number of sales across the country has meant that, apart from Covid (during the first half of 2020), this marked the second lowest figure since 2015.

More than three-quarters (78 per cent) of these houses were purchased by a first-time buyer or by a mover who moved permanently from London to another part of Great Britain.

They bought 25,350 homes outside the capital during the first six months of 2023, 5,800 or 19 percent less than in the same period in 2022.

Hamptons has revealed the number of homes bought by a Londoner outside the capital

If emigration continues at the same rate for the remainder of the year, it is likely that 53,780 Londoners will leave the capital for good to buy a home in 2023.

This almost matches the total number of homes sold in Wales last year at 56,000.

With a record 85 per cent of those leaving London moving to a more affordable area, this will save mortgage buyers a total of £357m each year in annual mortgage payments this year.

It compares with savings of £157m for those who left London in 2019 when mortgage rates were lowest.

That said, leaving London is also a way for households to reduce or even pay off their mortgage debt.

So far this year, 18 percent of those leaving London have bought their new home without a mortgage, up from a low of 14 percent in 2020.

Adding to the problems for mortgage holders, financial experts have warned that rates could rise as much as 6 percent over the next year.

Affordability pressures have also squeezed buyers’ budgets and meant those leaving London are buying smaller houses.

So far this year, the average Londoner has spent £429,800 on their new home outside the capital, just over £60,000 less than those who left in 2022, when mortgage rates were lower.

As a result, 37 per cent of those leaving London bought a one or two-bedroom house, up from 33 per cent last year.

Hamptons also revealed the different regions where those leaving London decide to move to.

Where are buyers going?

Those leaving London are increasingly exchanging the South East for more affordable pieces in the East of England.

The proportion of people leaving London and moving to the south-east fell below 40 per cent for the first time since 2009 this year.

A total of 39 percent of households permanently leaving the capital have moved to south-east England so far this year, up from 45 percent in 2022.

Meanwhile, one in three who left London headed for the east of England this year, up from 28 per cent in 2022.

Local authorities such as Epping Forest, Chelmsford and Stevenage are among the top 15 areas that have seen the largest increase in the proportion of prospective buyers from London since 2019.

Top 15 local authorities with the largest increase in proportion of London prospective buyers since 2019 revealed

The data not only encapsulates Hamptons sales, but is compiled using data from some 550 estate agency branches across Britain that are part of its parent company, the Connells Group.

Hamptons’ Aneisha Beveridge said: “Higher mortgage rates have halted the unwinding of arguably the biggest Covid-induced trend in the housing market: emigration from London.”

“Rather, emigration from London this year has been increasingly driven by need over need, as higher mortgage rates squeeze buyers’ budgets, pushing them to seek smaller homes in more affordable areas.

“Most of these developers are still looking to maintain strong ties to the capital. This has supported smaller house values in some of the most affordable cities within an hour’s drive of London.

‘Looking ahead, the likelihood of higher mortgage rates for longer may keep the pace of emigration from London.

“We are also reaching the point where a large number of households who bought a house in the peak of the London market between 2014 and 2016 could be looking to move in the coming years.

“And with property prices in parts of the capital lower today than when they bought, moving the city to a cheaper area off the M25 might be the only option for those who need to grow.”