LONDON: British property agents say aspiring home buyers are retreating to the sidelines as the Bank of England (BoE) considers raising interest rates.
The Royal Institution of Chartered Surveyors said its measure of new buyer inquiries fell four points to minus 22 in September, declining for the first time since March.
The negative reading means more surveyors reported a slowdown in demand than an increase.
The BoE has kept interest rates on hold since the start of the United States-Israel war on Iran, but that could change, with markets pricing in at least one hike before the end of the year as inflationary pressures build.
It’s a striking reversal for aspiring home buyers who were expecting a rate cut before the Middle East conflict began.
Average two-year mortgages rates have climbed almost one point since the start of the war, nearing 6% in recent days.
“A renewed rise in interest rate expectations has created a fresh headwind for the housing market, with buyers becoming a little more cautious and sales activity losing some momentum this month,” Tarrant Parsons, head of market research and analysis at the Royal Institution of Chartered Surveyors said.
Agents also said agreed sales declined, while falling house prices became more widespread for the first time in four months.
The situation is particularly bleak in London, with the indicator tracking home values posting its weakest reading in the capital.
The report added to signs that higher borrowing costs are increasingly weighing on prospective home buyers.
Recent BoE figures showed mortgage approvals declined to their lowest level since 2023, and lender Nationwide reported the sharpest drop in house prices since May.
Home sales and prices are set to remain under pressure over the next three months, according to the institution.
The longer-term outlook is also darkening, as surveyors no longer expect prices to return to growth in the next 12 months.
“The market may need to contend with a somewhat longer period of subdued activity as households adjust to the prospect of borrowing costs remaining higher than previously anticipated,” Parsons said. — Bloomberg
