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Property portal, ESPC has been a ‘go-to’ resource for buying, selling, renting and letting property for more than half a century – here, it considers how interest rates are shaping buyer behaviour in Edinburgh – and how buyers and sellers can navigate the current environment.
How are interest rates shaping buyer behaviour?
When interest rates began to climb in 2022, many predicted a sharp slowdown in the
Scottish housing market. Higher borrowing costs were expected to put buyers off, cool
demand and ultimately push down prices. In Edinburgh especially, there was speculation that the post-pandemic surge would grind to a halt.
There was, indeed, a short period of hesitation. The sudden jump in mortgage rates forced many buyers to pause and recheck their affordability, while others decided to wait and see how much higher rates might climb. Sellers, too, began to adjust expectations, and for a brief spell, the market seemed calmer after the frenzied competition of the Covid years.
But this pause didn’t last. In Edinburgh and the surrounding areas, demand returned quickly, and house prices continued to grow. Predictions of a collapse never materialised, and the city’s housing market showed remarkable resilience in the face of higher rates. Several factors explain why.
Why Edinburgh bucked the trend
Edinburgh’s strong economy and diverse employment base have supported buyer
confidence. Stable jobs and incomes have meant many households could still proceed with moves, even if borrowing costs were higher.
While affordability did tighten, most buyers adapted rather than withdrew altogether. First-time buyers are most affected by higher rates. Many have adapted by choosing longer-term mortgages to reduce monthly payments, exploring shared ownership schemes or relying on family help for deposits. These strategies allow more people to step onto the property ladder even when borrowing is expensive.
The demand in the capital has always been driven by necessity as much as choice. Family growth, relocations and life events continue to create a steady flow of buyers, whatever the wider economic picture.
Shifts in buyer behaviour
While demand has remained strong, the way people buy has changed since 2022. Buyers are now more cautious, with mortgage approvals and affordability checks playing a central role in decision-making. Lenders’ stress tests are tougher, and this has encouraged buyers to be more realistic about what they can afford.
Another clear shift has been around pricing. During the pandemic, bidding wars and offers far above home-report value were common. In recent years, however, the percentage paid over home-report value has eased. Buyers are less willing to overstretch, and value for money is now a stronger priority than it was in the ultra-competitive market of 2020-2021.
Looking ahead
Interest rates will remain an important factor in shaping confidence and affordability. While higher rates do narrow options for some, Edinburgh’s experience since 2022 shows that they need not rule out homeownership. With careful planning, expert mortgage advice and realistic expectations, buyers are still able to make successful moves.
For sellers, understanding that buyers are more price-conscious than before is crucial.
Correct pricing, presentation and flexibility will make the difference between a property
selling smoothly or stalling on the market.
The Edinburgh housing market has proven itself resilient through a challenging few years. While interest rates have reshaped behaviour, demand remains strong, and the city continues to attract buyers determined to put down roots.
