Rising mortgage costs dent buyer demand amid ‘housing market mood shift’

Rising mortgage costs have dented demand from buyers in the property market, dampening longer-term expectations for house prices , according to surveyors.

The Royal Institution of Chartered Surveyors (Rics) said the housing market was losing momentum in March as rising borrowing costs and wider geopolitical uncertainty weighed heavily on buyer confidence and sales activity.

A net balance of 39 per cent of professionals saw new buyer inquiries falling rather than rising, deteriorating from a balance of 29 per cent who saw this in February.

This was the weakest reading since August 2023, as housing market optimism seen earlier in the year faded.

Agreed sales also deteriorated, with a net balance of 34 per cent of professionals seeing falls, down from a balance of 13 per cent who saw this the previous month.

Rics said the report points to a market increasingly pressured by inflationary concerns and higher mortgage costs.

A net balance of 33 per cent of professionals expect sales activity to weaken further over the next few months.

Looking 12 months ahead, a net balance of just one per cent of professionals expect sales to weaken, indicating a broadly flat market.

A balance of 23 per cent of professionals saw house prices falling rather than rising in March.

Price expectations for the next three months also weakened, with a net balance of 43 per cent of professionals expecting falls.

Looking a year ahead, a balance of two per cent of professionals expect price increases, pointing to little overall price growth over the year ahead.

Looking across the UK, London, East Anglia, the South East and the South West all posted weaker price readings than the national average, while Scotland and Northern Ireland continued to report rising prices.

On the supply side, new instructions to sell remained subdued and the amount of unsold stock on estate agents’ books rose to an average of 47 properties, up from around 45 at the start of the year.

Tarrant Parsons, Rics head of market research and analysis, said: “The mood across the UK housing market has shifted markedly over the past couple of months.

“What had been a cautiously improving picture for activity has been knocked off course by the wider macro fallout from the Middle East conflict, as the renewed deterioration in the mortgage rate outlook has proved particularly challenging.

“Indeed, with average fixed rates climbing back above five per cent according to some sources, it is unsurprising that buyer demand has softened.

“The path ahead hinges on whether or not recent surges in oil and energy costs begin to reverse in what remains a highly uncertain geopolitical environment.”
On Wednesday, financial information website Moneyfacts said mortgage rates are likely to remain higher for “some time yet” despite some signs of the upward pressure easing.

Global stock markets have been recovering after the US and Iran agreed a two-week ceasefire, and Moneyfacts said that calming markets should have a stabilising impact on the mortgage market.

Adam French, head of consumer finance at Moneyfacts, said: “The longer the ceasefire holds and markets calm, the more the mortgage market will stabilise, and rates could even begin to edge lower.

“But for now, it’s more likely to slow or pause increases rather than trigger any sharp falls.”
“In today’s environment, it’s not just about getting on the ladder, but managing the cost of staying on it.”