UK estate agents gloomiest since 2009 as mortgage rates bite

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Housing demand and prices have fallen across the UK and estate agents are at their most gloomy in 14 years as surging mortgage rates hit the market, according to a leading property survey.

The Royal Institution of Chartered Surveyors on Thursday said its house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in home prices, fell to minus 46 last month from minus 30 in May.

The drop represented the lowest reading on the index since April 2009, apart from February when it also stood at minus 46.

Mortgage costs have risen to their highest levels for more than a decade as the Bank of England increases interest rates in an effort to reduce inflation to its 2 per cent target.

Mortgage rates have risen rapidly since the end of May, when unexpectedly hot wage growth and inflation pushed higher markets’ expectations for interest rates over the medium term.

The surge in mortgage costs “is clearly visible in the key RICS metrics regarding buyer inquiries, sales and prices, which have all retreated over the past month”, said Simon Rubinsohn, RICS chief economist.

“Inevitably in this environment, activity levels are likely to remain relatively subdued,” he added.

The RICS net score for buyer inquiries slipped to an eight-month low of minus 45 in June, down from minus 20 per cent the previous month.

Newly agreed sales also deteriorated, with the net score falling sharply to minus 34 in June from minus 8 in May — the lowest reading since December.

The average two-year fixed residential mortgage rate rose to 6.7 per cent on Wednesday, according to data provider Moneyfacts. It had been below 3 per cent until spring 2023.

The outlook for house prices was gloomier over both the next three and 12-month horizons, according to RICS.

When the surveyors were asked about prices in the year ahead, the net score fell sharply to minus 49 in June from minus three the previous month, affecting all of the UK with the exception of Northern Ireland and Scotland.

With fewer people able to afford to buy a property, rental demand is high. The net balance of surveyors reporting increased demand was plus 40, the survey found, with most anticipating rental prices would rise in the three months rather than decline.

The data comes as the BoE showed on Wednesday that 1mn households face mortgage payment increases of £500 or more by the end of 2026, with another 6mn expecting increases up to that amount.

The average UK house price has already fallen by £11,500 from its high last August to £262,200 in June, according to data by the mortgage provider Nationwide.

Gabriella Dickens, an economist at Pantheon Macroeconomics, said she expected that “affordability will worsen further over the coming months”.

“House prices will not stabilise until they have fallen about 10 per cent from their 2022 peak, with the low point probably not coming until early next year,” she added.