The UK housing market is showing clear signs of decline, with falling sales, prices, and demand across much of the country. The Royal Institution of Chartered Surveyors (Rics) reported that its index of buyer enquiries dropped to minus 22 in September, down from minus 18 in August. Agreed sales also fell to minus 18 from minus 16, while house prices slipped to minus 32 from minus 28. These figures indicate a worsening trend, particularly concerning as September is typically a busy month for the housing market.
Research from Lloyds shows that the average house price in September was £298,441, unchanged from a year earlier. Mortgage applications have also declined significantly, with a 18.2% drop in the third quarter compared to the previous year, and a 18.6% decrease in applications from first-time buyers. The South East, particularly properties priced over £1.25 million, has been hit the hardest. In Bristol, one agent noted that current prices are similar to those from five years ago.
The market is further strained by higher borrowing costs and geopolitical uncertainties, exacerbated by the ongoing Middle East war. The Bank of England data reveals that the five-year average fixed mortgage rate with 75% loan-to-value climbed to 4.98% at the end of September, the highest rate since 2023. Lenders anticipate that the Bank of England will eventually increase rates due to inflationary pressures, which could worsen the housing market's decline.
While the North is faring slightly better, the overall economic impact of a stagnant housing market is significant. Around five million households are expected to face increased mortgage repayments by the end of 2028. The government's upcoming 'Your First Home' help-to-buy scheme may offer some relief, but its effectiveness remains uncertain. The market's current state resembles conditions not seen since before the 2008 financial crash, raising concerns about the potential return of negative equity.