UK housing market demand fell further in September as rising mortgage rates prompted buyers to pull back, with the Royal Institution of Chartered Surveyors (RICS) reporting that 22 per cent of property professionals saw buyer enquiries decline during the month, up from 18 per cent in August.
Agreed sales also slipped. Some 18 per cent of professionals recorded a fall in completed sales, compared with 16 per cent the previous month. Tarrant Parsons, head of market research and analysis at RICS, said: ‘A renewed rise in interest rate expectations has created a fresh headwind for the housing market, with buyers becoming a little more cautious and sales activity losing some momentum this month.’
Buyer enquiries and sales losing ground
The September figures were already heading in the wrong direction, but data published by MPA Magazine shows conditions worsened further into October. Buyer enquiries fell for the sixth successive month, with the balance deteriorating to -55% in October from -36% in September, pointing to a sustained loss of momentum rather than a brief seasonal dip.
Just under a quarter of professionals in the RICS survey expected house prices to fall rather than rise over the next three months. That follows data from Lloyds showing the average house price in London fell by 2.2 per cent to £531,548 in the year to September, a worse result than August’s 1.5 per cent decline. Across the UK as a whole, house prices were unchanged both in the month to September and year on year, an improvement on the previous month’s 0.3 per cent drop.
Parsons said the market ‘may need to contend with a somewhat longer period of subdued activity as households adjust to the prospect of borrowing costs remaining higher than previously anticipated.’
Fixed rates break through six per cent as UK housing market demand stalls
The immediate driver is a sharp repricing of fixed-rate mortgages. The average five-year fixed mortgage rate broke through the six per cent mark for the first time in three years this week, after a series of lenders raised prices. Barclays raised selected fixed rates on four separate occasions. HSBC, Lloyds, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
The volatility has been driven by a repricing of swap rates, which serve as the primary benchmark for fixed-rate mortgage pricing and reflect market expectations for interest rates over two, five and ten-year terms.
Rachel Springall, finance expert at Moneyfacts, said: ‘Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers.’ To understand the scale of the shift, data from the Consumer Financial Protection Bureau shows that mortgage interest rates have risen by more than five percentage points since bottoming out at 2.65 per cent in January 2021, with rates peaking at 7.79 per cent in October 2023. That context underlines how abruptly the borrowing environment has shifted for households accustomed to a decade of historically low rates.
The Bank of England has left its base rate unchanged at 3.75 per cent, but top economists are pencilling in a potential hike when the Monetary Policy Committee gathers in November. Interest rate-setter Dave Ramsden said last week that inflation risks have ’tilted more to the upside’ since the Bank’s last decision in September. Ramsden, who voted with the majority in favour of holding rates, added that if ‘upside pressures on the inflation outlook continue to build, there could be a case for increasing Bank Rate.’
With buyer enquiries falling for a sixth straight month and fixed-rate products sitting at levels not seen since 2020, the November Monetary Policy Committee meeting has become a key moment for the market: any further rate increase would add to the pressure on households already reassessing what they can afford to borrow.
