Off-plan house purchases have plummeted in the last year – and that’s largely down to higher mortgage rates.

Property consultancy Hamptons says some 32% of new homes sold in England and Wales last year were snapped up before completion. That’s the lowest percentage since 2013.

The situation is more drastic still in London where fewer than half of new homes sold last year had been bought off-plan – the lowest level since 2012.

Hamptons says higher mortgage rates are to blame, squeezing new home buyers harder than most, as they are considered to be the most financially-stretched of all property purchasers.

Apartments still dominate the off-plan sector, according to Hamptons, with 45% more likely to be sold before completion than terraced houses. However, larger homes recorded the sharpest falls in off-plan sales, pulling down the share of homes sold before completion from 39% a year earlier..

Hamptons new build analyst David Fell says: “Off-plan sales are the foundation of most house builders’ businesses. This means selling fewer homes before they’re built is bad news for their bottom line.

“In what’s a cash-intensive business, house builders typically borrow to build homes, paying it back when they’re sold. But with more homes only sold after they’re finished, it means developers are borrowing money for longer and at higher interest rates. With off-plan sales harder to come by, housebuilders have responded by slowing build rates to preserve capital and ensure they’re not left with large numbers of unsold finished homes.”

He adds: “In a world of low-interest rates, incentives that cut the size of the deposit were the magic bullet to help buyers into homeownership. Even buyers with a 5% or 10% deposit found mortgage repayments were much cheaper than renting a similar home.

“But higher mortgage rates have introduced a new barrier in the form of unaffordable repayments and have pushed buyers towards smaller, more affordable homes that are often second-hand.”