The resurgence of the UK’s property market has been dealt a blow by a significant surge in mortgage rates, with lenders persistently raising costs for aspiring homeowners.
According to a survey conducted by The Royal Institution of Chartered Surveyors (Rics), new home buyer inquiries experienced a setback in April following three consecutive months of growth.
In April, a net balance of 1% of property professionals reported a decline in new buyer inquiries, contrasting with a balance of 6% reporting an increase in inquiries in March.
Rics highlighted mixed regional feedback on buyer demand, with a noticeable loss of momentum observed primarily in London and southern regions of England.
Buyers have grown increasingly cautious in the face of rising mortgage rates, contributing to a slump in house prices last month.
In April, a balance of 5% of professionals reported a decrease in prices rather than an increase, remaining unchanged from the previous month.
Additionally, a balance of 1% of professionals anticipate a decline in house sales over the next three months, marking the weakest outlook since October 2023.
Major lenders have embarked on another round of mortgage rate hikes over the past fortnight.
Simon Rubinsohn, Rics’ chief economist, commented, “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 increase in mortgage pricing has contributed to the stagnation in buyer inquiries over the past month, as well as the slightly more cautious outlook for the near term,” Rubinsohn added.
Nevertheless, there remains a prevailing belief that market activity will intensify later in the year and into 2025, irrespective of any political uncertainty surrounding the upcoming general election.
The report noted that virtually all parts of England reported either stagnant or marginally negative house price readings, while Northern Ireland and Scotland sustained an upward trajectory in property values.
Looking ahead, a net balance of 33% of professionals anticipate an increase rather than a decrease in house sales over the next year.
Regarding property availability, a net balance of 23% of professionals observed a rise in new instructions to sell during April, marking the most positive figure since September 2020.
In the lettings market, tenant demand appears to be waning, but there remains a shortage of landlord instructions, according to Rics.
Average stock levels have reached a three-year peak, with 43 properties per branch, the report highlighted.