Your trusted property experts

Will The Rise in Interest Rates Affect Auctions?

Author avatar
Share Share article to LinkedIn Share article to Twitter Share article to Facebook

Interest rate rises are affecting the housing market. Homeowners and buyers face paying hundreds more in monthly mortgage costs, meaning sellers are looking at lower demand in 2023. Therefore, it’s not unreasonable for sellers to explore other options for selling their homes to maximise return. One of those options is through an auction. Here, we look at interest rate rises and the correlation with selling a house at auction.

What’s happening with interest rates?

Since the end of 2021, the Bank of England has increased interest rates a whopping 13 times. What was 0.1% in November 2021 is now 5.0%. Anyone getting a mortgage or remortgage during the current climate faces paying hundreds more each month.

This poses a problem for sellers, as the property market may begin to cool during 2023 due to affordability issues. With interest rates rising, there is an apparent fear among some buyers.

Mortgage payments are increasing, and the affordability of homes and getting on the ladder seems more challenging than ever.

Where do auctions come into play?

According to sales data from auctioneers, 281% of the country saw growth in the number of lots sold in 2022 and 2023 compared to 2018 to 2019, showing that despite economic adversities and a global pandemic, demand for auctions remained strong.”

Auctions generally are a good indicator of market sentiment and always respond the fastest to changes in the market . No wonder, that vendors typically reserve spots quickly with the aim of selling their homes for market price or higher.

Start Your Online Auction

Should I sell my house at auction?

There aren’t any guarantees when selling your home, but using an auction has its benefits. And it becomes even more appealing during specific market conditions, such as a downturn in property transactions because of higher interest rates.

An auction can be a good option if you want to sell your home quickly or if traditional channels don’t have the desired effect. Auctions can also be handy if you’re looking to sell a property that needs extensive repairs or has legal issues.

Essentially, it comes down to your desire to sell and depends on specific circumstances. But listing your house in a traditional or online auction can be a viable way to sell your property.

Why should I auction my house?

Selling a house at auction may have several advantages over traditional channels. From increased transparency to more certainty over the sale, here are some of the potential benefits of auctioning your house:

  • Transparency – Auctions are open to the public, meaning anyone can attend (if it’s a traditional auction) and bid on your property. This can provide a level of transparency that may not be present in traditional sales.
  • Online auctions, also known as ‘the modern method of auction’ offer slightly more flexibility regarding time frames for completion, enabling buyers to secure a mortgage.
  • Competitive bidding – Auctions can create a sense of competition among buyers, which can drive up the final sale price. It’s a beneficial feature if your property is unique or in a desirable location.
  • Certainty of sale – When you put your property up for auction, you’re effectively creating a deadline for buyers to purchase it, as it’s sold on the day of the auction. Subsequently, the seller may have greater certainty over a property sale.
  • Less negotiation – Once bidding ends on the auction, your property is sold. There is no negotiation.

Is it quicker to sell a house at auction?

The traditional auction process is speedy. It is typically 3-4 weeks of marketing followed by auction day and then 20 working days to completion. With a conditional auction (often referred to as the modern method of auction) it takes 3-4 weeks of marketing, auction day and up to 56 working days from the issue of draft contracts. The conditional method imposes greater speed on the transaction than via an estate agent (sale by private treaty) but the process is more involved than a traditional auction.

Both auction options can be beneficial if you need to sell your house quickly. Speak to your local estate agent and they will be able to assist you.

Find Your Agent

However, it’s worth noting that the auction process starts with preparation, which can take some time. It’s good to get your property in the best condition possible and you’ll need to prepare the legal documents in advance. Also, the sale completion can take longer, depending on the complexity of the sale and the buyer’s ability to complete the transaction.

Additionally, while the auction itself is a definite date, you’ll need to decide when to auction the property. Depending on the number of other properties being auctioned on the same day, it could mean that fewer people participate and potentially reduce the chances of selling the house quickly or even at all.

Even so, it can offer a faster alternative than selling through traditional means., which can take much longer, often several months. An estate agent will need to market the property, show it to potential buyers and negotiate. This process can take a lot of time, especially if there are complications with the sale.

Find a Solicitor

Are there any disadvantages?

While selling a house at auction has several advantages, there are some aspects you should consider before committing to an auction-led sale. For instance, an auction sale may lack personalisation, as it’s just one of many homes listed for sale during the auction.

Even though auctions are on the rise, the actual buyer turnout may still be on the lower side, depending on how well the auction company markets that specific auction or sales agent promotes the property. You should also remember that you’re binding yourself to sell the property on the day of the auction if the reserve price is met. It’s not like a traditional sale, where you have time to consider an offer.

It’s always important to check terms to make sure you understand any fees or reservation costs payable under any method.

Where can I sell my property at auction?

If you’re interested in selling your home, whether at auction or via the traditional means using an estate agent, it’s important to use a regulated company, like those offering Propertymark Protection. This means you benefit from the advice of a qualified, professional accountable to an independent regulator and adhering to higher standards and practices than the law requires.

Find Your Agent

Last Updated: November 22nd, 2023

Phil Spencer

Join Phil Spencer's 'My Move iQ'

Sign-up for FREE and access

FREE home moving toolkits

Exclusive offers and discounts

FREE tickets to the biggest property and home shows

My Move iQ Competitions

Unlock exclusive benefits

Browse more in this category: