The UK housing market lost momentum in September as higher borrowing costs made buyers more cautious, according to the Royal Institution of Chartered Surveyors (RICS). Buyer enquiries weakened for the first time since March, agreed sales fell, and expectations for the coming months deteriorated.
The figures come as Moneyfacts warns that higher fixed mortgage rates have added almost £2,000 a year to repayments on a typical £250,000 mortgage. The findings also reinforce the subdued picture painted by the latest Lloyds House Price Index, which reported UK house prices were unchanged in September, both monthly and annually, with the average property price at £298,441.
Buyer demand falls
RICS recorded a net balance of -22% for new buyer enquiries in September, down from -18% in August, marking the first deterioration for six months. However, the figure remains well above the -41% recorded in March.
Agreed sales also weakened, with the balance slipping from -16% to -18%, though still stronger than the three-month average of -25%. Expectations for sales over the next three months fell from -3% to -6%.
Mortgage repayments jump almost £2,000
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said affordability remained a major obstacle for buyers. “Higher mortgage rates and the rising cost of living are creating a painful affordability squeeze for new buyers,” she said.
Springall said weaker demand could give buyers greater bargaining power, but higher mortgage costs risk wiping out the benefit of softer house prices. “The punishing rise in fixed mortgage rates has meant a typical mortgage repayment is almost £2,000 more per year, compared to the start of 2026,” she said.
A borrower taking a £250,000 mortgage over 25 years would currently pay around £1,611 a month, according to Moneyfacts, based on an average five-year fixed rate of 6.00% compared with 4.91% at the start of 2026. That represents an increase of around £163 a month, or £1,956 a year.
More homes coming to market
There were some signs of improvement on the supply side. New sales instructions recorded a net balance of +6%, the first positive reading since mid-2025. However, market appraisals remained below levels recorded a year earlier, suggesting any increase in available stock could remain limited.
Springall described the improvement in supply as “welcome” but said the housing market remained fragile. She suggested some homeowners could be delaying plans to sell because of weaker prices and higher borrowing costs.
House price pressure intensifies
The RICS house price balance fell to -32% from -28% in August, ending four consecutive months of improvement. Most regions of England recorded negative price balances, with London notably weaker than the national figure. Northern Ireland continued to record rising prices, while Scotland reported modest growth.
The near-term outlook remains subdued, with the three-month house price expectations balance at -24%. However, the 12-month measure was zero, pointing to broadly flat prices over the year ahead.
‘Pain in the post’
Tom Bill, head of UK residential research at Knight Frank, warned that higher borrowing costs had yet to work fully through the market. “There is pain in the post for the UK housing market as the impact of higher mortgage costs filters through the system,” he said. “Mortgage offers can last for six months, which means deals that pre-date the Middle East conflict have now disappeared.”
Bill said higher borrowing costs would increase downward pressure on prices and transactions during the final months of the year. He also warned that speculation over possible tax changes ahead of the Budget could add to uncertainty.
Rental demand gathers pace
The lettings market presented a contrasting picture. The tenant demand balance increased to +23%, marking a third consecutive monthly acceleration. Landlord instructions remained firmly negative, maintaining pressure on rental supply.
A net balance of +37% of respondents expects rents to rise over the next three months, down from +44% in August but well above the +27% average recorded during the first half of 2026. Springall said high mortgage rates could keep would-be buyers in the private rented sector for longer, increasing competition between tenants while rental supply remains constrained.
Higher rates create ‘fresh headwind’
Tarrant Parsons, head of market research and analysis at RICS, said rising interest rate expectations had created “a fresh headwind for the housing market”. He said buyers had become “a little more cautious”, while sales activity had lost momentum.
However, Parsons said the figures did not represent a significant change in direction. Instead, he said the market could face “a somewhat longer period of subdued activity” as households adjust to higher borrowing costs.
Springall said attention would now turn to the October Budget and the government’s Your First Home scheme. But she cautioned: “One scheme alone will not turn the market around, and improving affordability and housing supply will be vital if market conditions are to improve.”
