UK property market rebound hit by higher mortgage rates

The UK’s property market recovery has been hit by surge in mortgage rates as lenders keep hiking costs for prospective homeowners.

New home buyer inquiries fell back in April following three months of increases in a row, according to a survey by The Royal Institution of Chartered Surveyors (Rics).

A net balance of 1% of property professionals reported new buyer inquiries falling rather than rising in April, following a balance of 6% reporting inquiries rising in March.

The regional feedback on buyer demand is mixed, with a notable loss of momentum mainly seen in London and southern parts of England, Rics said.

Buyers have also become cautious amid rising mortgage rates, which has led a slump in house prices last month.

A balance of 5% of professionals reported prices falling rather than rising in April. This was unchanged from the previous month.

Read more: Bank of England expected to hold interest rates

A balance of 1% of professionals expect house sales to fall rather than rise in the next three months, marking the weakest reading since October 2023.

Most major lenders have entered another cycle of increasing their mortgage rates over the past two weeks.

Simon Rubinsohn, chief economist at Rics, said: “Feedback to the latest survey demonstrates the sensitivity of the sales market to interest rates at the present time, given the continuing challenge around affordability.

“A modest back up in mortgage pricing has contributed to the flatlining in the buyer inquiries metric over the past month, as well as the slightly more cautious signals around near-term expectations.

“That said, there is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.”

Virtually all parts of England returned either a flat or marginally negative reading for house prices, while Northern Ireland and Scotland continued to see an upward trend in property values, the report said.

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Over the coming year, a net balance of 33% of professionals expect house sales to rise rather than fall.

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Looking at the number of properties available on the market, a net balance of 23% of professionals noted an increase in new instructions to sell during April. This represents the most positive figure since September 2020.

Looking at the lettings market, feedback suggests that tenant demand is continuing to lose momentum, but landlord instructions remain in short supply, Rics said.

Average stock levels have picked up to a three-year high, at 43 properties per branch, the report said.

Watch: House prices predicted to flatline or fall further in 2024, as rebound ‘unlikely’

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