Experts issue mortgage cost warning as buyer demand drops
Rising mortgage costs are significantly impacting buyer demand in the UK property market and hitting long-term house price expectations, pollsters say.
The Royal Institute of Chartered Surveyors (RICS) reported that the market slowed in March as rising borrowing costs and geopolitical uncertainty took a toll on confidence.
A net 39 percent of professionals reported a decrease in new buyer inquiries compared to 29 percent in February. This marks the weakest reading since August 2023, when optimism in the market faded.
Agreed sales also slowed; A 34 percent drop was reported; Compared to the previous month, this rate was 13 percent. RICS said the report pointed to a market increasingly under pressure due to inflation concerns and high mortgage costs.
Looking ahead to the coming months, the survey shows that nearly 33 percent of professionals expect sales to weaken further over the next few months. The rate of those who expect sales to weaken over the next 12 months is only 1 percent. This indicates that the market is generally horizontal.
23 percent of professionals saw house prices fall in March. Price expectations for the next three months also weakened; 43 percent expected a decrease. When we look one year ahead, only 2 percent expect a price increase, indicating that overall growth is very low.
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Looking at the UK, London, East Anglia, the South East and the South West all recorded weaker price readings than the national average, while Scotland and Northern Ireland continued to report rising prices.
On the supply side, new sales orders remained weak 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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RICS stated that the mismatch between supply and demand in the rental market continues, with demand for homes from tenants increasing and orders from landlords continuing to decrease.
Tarrant Parsons, RICS head of market research and analysis, said: “The mood in the UK housing market has changed markedly over the last few months.
“A cautiously improving outlook for activity has been thrown off course by the broader macro impacts of the Middle East conflict, with the renewed deterioration in the mortgage rate outlook proving particularly challenging.
“In fact, with average fixed interest rates rising above 5 percent again, according to some sources, it is not surprising that buyer demand has softened.
“The path ahead depends on whether recent increases in oil and energy costs reverse in a highly uncertain geopolitical environment.”
On Wednesday, financial information website Moneyfacts said mortgage interest rates were likely to remain high “for some time” despite some signs that upward pressure is easing.
Global stock markets are recovering after the US and Iran agreed to a two-week ceasefire, and Moneyfacts said the calming markets should have a stabilizing effect on the mortgage market.
Adam French, head of consumer finance at Moneyfacts, said: “The longer the truce lasts and markets calm, the more the mortgage market will stabilize and interest rates may even start to fall.
“But for now, it is more likely to slow or pause increases rather than trigger sharp declines.”
Jinesh Vohra, managing director of mortgage app Sprive, said: “Strategies such as making regular overpayments or reducing your balance sooner can have a huge impact, potentially saving homeowners thousands over the life of their mortgage.
“In today’s environment, it’s not just about getting on the ladder, but also managing the costs of staying on it.”
