UK Housing Market Slumps Amid Higher Mortgage Rates and Tax Uncertainty

The UK housing market remains under pressure from higher mortgage rates and uncertainty over potential tax changes. According to data from the Royal Institution of Chartered Surveyors, house prices have been declining since April 2025, with a reading of minus 28 in August marking a modest improvement from minus 29 in July.

Despite this slight lift, agents expect prices to continue sliding over the next three months, particularly in London. Tarrant Parsons, head of market research at RICS, noted that 'the borrowing cost outlook could yet deteriorate further' due to the Bank of England's hawkish tone and renewed volatility in global energy markets.

The typical two-year fixed mortgage has climbed to 5.67%, up from 4.83% before the conflict in Iran. Mortgage approvals have also slipped to levels last seen in January 2024, according to BOE figures. The RICS report echoes a familiar pattern from the run-up to the 2025 Labour budget, when buyers pulled back amid talk of a levy on the UK's priciest homes.

For now, agents see a steadier trajectory for prices over the next year overall, but London is expected to lag behind, with values likely to continue slipping. The mix of higher mortgage costs, a hawkish BOE tone, and tax uncertainty can sap confidence quickly, especially if memories of 2025's pre-budget pause resurface.