When mortgage rates increased dramatically at the end of last year, many housing commentators predicted that lower-value property markets would suffer disproportionately.

It was expected that sales volumes in prime markets would be boosted by higher levels of housing equity, cash sales and general affluence. But it is not working out that way, according to Knight Frank.

The estate agency points to the fact that September’s mini-Budget sent five-year fixed rate mortgages above 6% as financial markets reacted badly to the previous government’s low-tax plans. They have since settled closer to 4% as a relative sense of political and economic calm returns under the existing PM Rishi Sunak.

There was a dramatic fall in activity in the first quarter of this year after the UK property market effectively shut three months early for Christmas in 2022. But Tom Bill, head of UK residential research at Knight Frank, points out that the is now bottoming out.

However, as the shock of the mini-Budget fades and a more adverse lending landscape emerges, all sections of the market are recovering at a similar pace.

Bill commented: “There was a 35% decline in the number of sub-£500,000 properties in England and Wales that went under offer in the first quarter of this year compared to the same period last year, OnTheMarket data shows. Above £500,000, the drop was exactly the same. In the £2 million-plus price bracket, there was a 37% decline.

“There are a host of reasons why lower-value markets are holding up better than expected, even with the Help to Buy scheme no longer running.

“One obvious explanation that shouldn’t be underestimated is that many buyers have simply accepted where mortgage rates have settled because they need to move. Some are taking out longer mortgages as affordability becomes stretched, but a strong jobs market, savings accumulated during the pandemic (including at the bank of mum and dad), and record levels of housing equity are smoothing the transition to a new normal for interest rates.”

The fact rents have been rising so quickly due to supply shortages in the lettings market has also prevented some buyers from becoming tenants.

“The bottom line is that buyers appear to have got their heads around where rates are,” said James Cleland, head of the Country business at Knight Frank. “All the normal drivers such as employment and schools are still relevant, but the crucial thing is that people now know where they are, which wasn’t the case at the end of last year.”

In higher-value markets, there is more natural immunity to volatility in the mortgage market, but it doesn’t mean buyers and sellers have capitalised on it.

“Prime markets are typically more discretionary and that has given buyers and sellers more flexibility in recent months,” said Stuart Bailey, head of prime central London sales at Knight Frank. “However, it also means they have had the flexibility to wait or do nothing, especially in this sort of buyers’ market where prices and sales volumes are flat.”