Soaring mortgage rates and the cost of living crisis are forcing more sellers to accept lower offers to secure a property sale, according to Zoopla.

The property website latest house price index showed that 42% of sellers were accepting discounts of 5% or more on the asking price of their home in the week ending 18 June – the highest level since 2018 – as buyers are driving a harder bargain.

Meanwhile, 15% of those trying to sell their home were accepting discounts of more than 10% on the initial asking price in the same time period. Buyers are pushing for lower prices because of higher mortgage rates and the cost of living crisis.

The average price of two- and five-year fixed-rate mortgages has hit the highest level for seven months, putting further pressure on borrowers reaching the end of their deals and on the buying power of those looking for a new home.

The latest data from the financial information firm Moneyfacts showed the average two-year fixed residential mortgage rate was 6.26% on Tuesday, up from 6.23% on Monday. The average five-year fixed residential mortgage rate was 5.87%, up from 5.86% on the previous day.

Mortgage rates have continued to climb after the Bank of England increased interest rates by half a point to 5% in June in an attempt to curb inflation.

Zoopla said higher rates would result in a 10-20% hit to buying power – the amount of money a buyer can afford to borrow to purchase a property – compared with when they were at 4%.

Richard Donnell, an executive director at Zoopla, said: “Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”

Buyers can attempt to offset the impact of higher mortgage rates and monthly repayments by either increasing their deposit or agreeing to longer mortgage terms. However, those are not options for all would-be buyers, and the further mortgage rates rise above 5%, the more buyers are squeezed out of the market.

This trend has been borne out in the data so far, with 14% fewer buyers in the market over the last four weeks compared with a year ago, Zoopla’s research showed.

Meanwhile, annual house price growth slowed to 1.2% in June and Zoopla predicted a return to “modest” quarterly house price falls in the second half of 2023.

Average UK house prices are on track to fall by up to 5% by the end of the year, although the drop depends partly on mortgage rates and inflation over the coming months.

A sudden increase in the number of homes for sale would also probably weigh on house price growth, and there are signs that supply is starting to grow at a higher rate. There were 18% more homes listed for sale in the past four weeks compared with the five-year average.

An uptick in supply would boost choice for buyers and give them more room to negotiate, driving larger house price falls.