Interest rate fears dampen UK house buying demand
Brits held off inquiring about buying new homes last month as fears over higher mortgage rates dampened the market. Housing demand dropped in September, according to a survey from the Royal Institution of Chartered Surveyors (RICS), which found that 22 per cent of property professionals saw buyer inquiries fall last month. That figure was up [...]
In September, the UK property market experienced a decline in buyer inquiries and sales activity due to concerns over rising mortgage rates. The Royal Institution of Chartered Surveyors (RICS) reported that 22% of property professionals noted a decrease in buyer inquiries, up from 18% in August. Agreed sales also fell, with 18% of professionals recording a decrease, compared to 16% previously.
Tarrant Parsons, head of market research and analysis at RICS, attributed the decline to renewed interest rate expectations, causing buyers to become more cautious and sales momentum to wane. Nearly a quarter of professionals surveyed expect house prices to fall within the next three months.
This follows data from Lloyds revealing that the average house price in London fell by 2.2% to £531,548 in the year to September, marking a more significant drop than the previous month's 1.5%. Across the UK, house prices remained unchanged in September and the year-on-year comparison, marking a contrast to last month's 0.3% decline.
Parsons suggests the market may face a prolonged period of subdued activity as households adapt to the expectation of higher borrowing costs. The average five-year fixed mortgage rate surpassed the six percent mark for the first time in three years, driven by volatility in the market, which is influenced by the re-pricing of swap rates that serve as a primary benchmark for fixed-rate mortgage pricing and reflect expectations for future interest rates over different terms.
Several banks, including Barclays, HSBC, Lloyds, Nationwide, Natwest, Santander, and TSB, have increased their fixed rates multiple times. Rachel Springall, finance expert at Moneyfacts, stated that the rising average fixed mortgage rates to three-year highs would be disastrous for borrowers.
The Bank of England has maintained interest rates at 3.75%, but leading economists predict a potential hike when the Monetary Policy Committee meets in November. Bank rate setter Dave Ramsden noted that inflation risks have shifted more to the upside since the Bank's last decision in September, and if "upside pressures on the inflation outlook continue to build, there could be a case for increasing Bank Rate."
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