Rising mortgage costs are significantly impacting buyer demand in the UK property market, hitting longer-term house price expectations, according to surveyors.
The Royal Institution of Chartered Surveyors (RICS) reported the market slowed down in March, with rising borrowing costs and geopolitical uncertainty weighing on confidence.
A net 39 per cent of professionals reported a drop in new buyer inquiries, up from 29 per cent in February. This marks the weakest reading since August 2023, as earlier market optimism faded.
Agreed sales also slowed, with 34 per cent reporting a drop, up from 13 per cent the previous month. RICS said the report points to a market increasingly pressured by inflationary concerns and higher mortgage costs.
Looking to the coming months, the survey shows that around 33 per cent of professionals expect sales to weaken further over the next few months. Over the next 12 months, only 1 per cent expect sales to weaken, indicating a broadly flat market.
A balance of 23 per cent of professionals saw house prices falling in March. Price expectations for the next three months also weakened, with 43 per cent expecting falls. Looking a year ahead, only 2 per cent expect price increases, pointing to little overall growth.
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.
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In the lettings market, a mismatch between demand and supply continued, with demand for homes from tenants rising while landlord instructions continued to decrease, RICS said.
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 5 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 on 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.”
Jinesh Vohra, chief executive of mortgage app Sprive, said: “Strategies like regular overpayments or reducing your balance earlier can have an outsized impact – potentially saving homeowners thousands over the term of their mortgage.
“In today’s environment, it’s not just about getting on the ladder, but managing the cost of staying on it.”