UK home sales are on track to drop to the lowest since 2012 this year as stubbornly high mortgage rates grip the housing market.

Residential transactions are set to fall over 20% from 2022, according to an estimate from property portal Zoopla based on the number of homes being sold “subject to contract” so far this year. That’s on the back of a plunge in deals funded by home loans, with mortgaged sales projected to drop 28% this year.

“It is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage reliant buyers,” said Richard Donnell, executive director at Zoopla. Meanwhile, “house price growth has slowed rapidly over the last year as demand weakens,” he added.

UK households are facing a stream of cost pressures triggered by pricey borrowing and inflation that’s slowly dropping back from generational highs. That’s led to a slump in first-time buyer sales, as wannabe homeowners remain stuck in ever-pricier rental contracts while mortgage costs surge.

Meanwhile, house prices are growing at the slowest annual rate for over 12 years, according to the report, as more Britons are priced out of purchasing a home. Buyer demand — billed as a leading indicator by Zoopla — declined by more than a third in the four weeks to Aug. 20 compared with the average for the same period over the last five years.

Mortgage rates are steadily declining after a summer spike, though the drop is expected to be a slow process as financial markets evaluate the Bank of England’s next move on interest rates. Still, a rise in home sales from the nation’s landlords — which are typically priced 25% lower than the wider market — is boosting choice for first-time buyers, Zoopla said.

What’s more, transactions are set to be propped up by buyers who aren’t reliant on debt. Cash sales are set to drop just 1% over 2023 compared to last year, as cheaper markets in Northern England and Scotland hold up better than Southern England.

“Cash buyers are more immune and on track to account for more than one in three sales in 2023,” Zoopla’s Donnell said. However, “rates need to fall below 5% before we see an increased appetite to move home in the second half,” he added.