Estate agents are warning that a potential interest rate rise this week could further weaken buyer demand and leave the housing market facing an unusually difficult end to the year.
The warnings follow Nationwide's latest figures, which show annual house price growth slowing to 0.5% in October. That is the weakest reading since January 2024.
Buyer behaviour shifts
Industry commentators say higher mortgage costs are already changing buyer behaviour. Some purchasers are reducing their borrowing, while others are delaying decisions.
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said the speed of mortgage rate increases had caught the market off guard. "Mortgage rates have risen far faster than anyone expected since the spring, and buyers have changed how they behave. People are choosing to borrow less and are cautious about moving."
Reynolds said uncertainty surrounding the Budget had compounded the slowdown. She added: "With a rate rise expected next week, fixed-rate mortgages are unlikely to fall before Christmas, so December will be even quieter than usual."
Interest rate rise fears
Jason Tebb, president of OnTheMarket, said the Bank of England's decision to hold interest rates throughout 2026 had supported affordability. However, he warned that inflation could force policymakers to change course.
"The Bank of England's decision to hold interest rates throughout this year has helped affordability and confidence, but there are fears that rising inflation may finally force its hand at next week's meeting, with the first rate rise this year."
Jonathan Hopper, CEO of Garrington Property Finders, also expects borrowing costs to remain under pressure. "No-one now expects the Bank of England to ease the pressure on mortgage interest rates when its Monetary Policy Committee meets next week." He predicted that cautious buyers would continue negotiating hard over the coming months.
Mortgage costs outweigh Budget support
Tom Bill, head of UK residential research at Knight Frank, said the Middle East conflict was increasingly affecting the housing market. "With both main house price indices hovering around zero and mortgage approvals down by almost a fifth versus last year, the toll of the Middle East conflict on the UK housing market is more obvious with each passing month."
He said rising mortgage costs were overshadowing the housing measures announced in the Budget. "The impact of rising mortgage costs eclipses any support measure announced in this week's Budget," he added.
Nicky Stevenson, managing director of Fine & Country, said buyers remain active but are becoming increasingly selective. "Buyers remain active, but they are increasingly cautious and selective about where they spend their money."
The comments suggest agents could face a challenging final two months of 2026. With borrowing costs remaining a concern, vendors may need to adjust their expectations to secure sales before Christmas.
