The UK housing market is losing significant momentum as potential buyers increasingly hold back, according to the latest report from the Royal Institution of Chartered Surveyors (RICS). Their sales market activity indicators remain 'firmly negative', reflecting a notable downturn in both new buyer enquiries and agreed sales across the country. This trend suggests that the cumulative impact of higher borrowing costs and broader economic uncertainty is now strongly influencing buyer behaviour.
Surveyors across the UK reported a continued fall in new buyer enquiries, a trend that has persisted for several months. Similarly, the number of newly agreed sales also saw a decline, indicating a shrinking pool of active transactions. This slowdown is particularly pronounced in areas that experienced rapid price growth during the pandemic, as affordability constraints become more acute. Halifax recently reported that average UK house prices fell by 0.3% in August, bringing the annual growth rate down to 0.8%, the lowest in over a decade. Rightmove data also indicated a slight monthly dip, with average asking prices dropping by 1.9% in August, a typical seasonal adjustment but one exacerbated by current market conditions.
The current environment presents significant challenges for various segments of the market. First-time buyers, already grappling with high deposit requirements, are now facing substantially higher mortgage rates. The average two-year fixed mortgage rate recently surpassed 6.5%, up from around 2% just a couple of years ago, drastically increasing monthly repayments. For instance, a buyer taking out a typical £200,000 mortgage at 6.5% would pay approximately £1,335 per month, compared to around £848 at a 2% rate. This substantial increase in borrowing costs is a major deterrent, making homeownership less accessible.
Existing homeowners looking to move, particularly those on expiring fixed-rate deals, are also feeling the pinch. Many face the prospect of significantly higher repayments when remortgaging, which can impact their ability or desire to upgrade or downsize. Landlords, meanwhile, are contending with increased mortgage interest costs and evolving regulatory landscapes, potentially affecting their investment decisions and the supply of rental properties. The Help to Buy scheme, which offered equity loans, closed for new applications earlier this year, removing a key support for first-time buyers in some regions.
Regionally, the market is experiencing varied impacts. While London and the South East, traditionally more expensive areas, have seen some of the sharpest declines in activity and price adjustments, other regions that previously saw strong growth are also starting to cool. The North West and Scotland, for example, have shown more resilience but are not immune to the broader slowdown. The stamp duty threshold remains at £250,000 for most buyers, with first-time buyers exempt up to £425,000, but these measures appear insufficient to offset the current headwinds.
Looking ahead, RICS's report suggests that the outlook for sales remains subdued for the coming months, with a net balance of surveyors expecting further declines. The persistent high cost of borrowing, coupled with ongoing cost of living pressures, is expected to continue to dampen buyer confidence and transactional volumes well into the autumn. The market is likely to remain sensitive to any shifts in interest rate policy from the Bank of England and broader economic indicators.
Source: Royal Institution of Chartered Surveyors (RICS)