The recent rise in interest rate expectations has stalled the previous run of improving conditions, the latest RICS residential market survey shows, with measures of buyer demand and sales activity turning marginally weaker over the month.
Despite this setback, the latest readings remain less downbeat than the lows recorded earlier in the year. Looking ahead, while the near-term outlook appears to have become a little more pessimistic, the twelve-month view remains that the market will stabilise further ahead.
The new buyer enquiries indicator registered a net balance of -22% in September, slipping marginally from -18% in August. This represents the first month since March in which the indicator has failed to become less negative.
Nevertheless, the latest reading remains comfortably above the recent low of -41% recorded six months ago, highlighting that although demand has softened slightly, current conditions are still less subdued than earlier in the year.
Likewise, the agreed sales series posted a net balance of -18%, marginally weaker than the -16% recorded previously. Even so, the latest reading remains less negative than the three-month average of -25%. Looking ahead, near-term sales expectations softened slightly, with the net balance easing to -6% from -3% previously. Although this points to a somewhat more cautious outlook over the next three months, the overall picture has not shifted significantly as yet.
Regarding new instructions, a net balance of +6% of respondents reported an increase in sales listings in September, marking the first reading in positive territory since mid-2025. That said, the latest figure points to only a modest rise. Moreover, contributors continue to report that the volume of market appraisals undertaken recently remains below the equivalent trend seen twelve months ago.
The latest results continue to signal that house prices are softening at the aggregate level. The headline house price net balance slipped to -32% from -28% in the previous month, breaking a run of four consecutive months in which the indicator had become gradually less negative. Consequently, the latest feedback suggests that, while the downward pressure on prices has eased somewhat compared with earlier in the year, it is not yet dissipating entirely.
At the regional level, most parts of England saw their house price net balances move slightly deeper into negative territory during September, with sentiment in London remaining notably weaker than the national headline reading. By contrast, house prices continue to rise in Northern Ireland, while Scotland is also reporting a modest degree of price growth.
Going forward, near-term house price expectations at the national level remain consistent with further downward pressure over the coming three months, with the net balance standing at -24%. Over the twelve-month horizon, however, the net balance of zero points to a broadly flat trend emerging. That said, this represents a downgrade from the slightly stronger outlook reported a couple of months ago, when respondents were still anticipating modest price growth.
Tomer Aboody, director of specialist lender MT Finance, commented: “Higher interest rates, higher inflation and higher taxes are an obvious recipe for disaster, not just for the housing market but the wider economy.
“Buyers and sellers are very hesitant, particularly with the Budget coming up later this month, and the fear of even more anti-growth measures.
“Until the government realises that one of the critical measures to stimulate the economy is to support the housing market, we will continue to see hesitancy and a lack of activity.”
Jeremy Leaf, north London estate agent and former RICS residential chairman, said: “Buyer interest has certainly increased since the end of the summer, even if not by as much as we had hoped.
“However, when confidence is not particularly strong, as now, uncertainty over the direction of travel for mortgage rates, inflation - even the Budget - weighs more heavily on decision-making.
“More time taken before offers are submitted, particularly for flats in view of the amount of choice, and protracted transactions are the result.”
Rachel Springall, finance expert at Moneyfactscompare, added: "Higher mortgage rates and the rising cost of living are creating a painful affordability squeeze for new buyers. However, there is no denying that those who can afford to buy have more bargaining power when demand remains weak and house prices are under pressure. First-time buyers with a sizeable deposit might be able to find a more affordable home due to flatlining house prices, but higher mortgage rates risk undermining that affordability boost.
“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. A borrower taking out a £250,000 mortgage over 25 years would face repayments of £1,611 a month based on the Moneyfacts average five-year fixed rate of 6.00%, its highest point in three years. That is around £163 per month more in repayments, or £1,956 more per year, compared to the average rate of 4.91% at the start of 2026.
“The supply of homes coming onto the market saw a modest uplift in September, with new instructions recording a net balance of +6% according to RICS, moving into positive territory for the first time since mid-2025. While this is a welcome shift, the uplift remains weak and the UK housing market remains fragile and is struggling to gain momentum. Some homeowners may be putting their plans to sell on hold amid falling house prices, the rising cost of borrowing and the cost of living, opting to stay put until their financial situation improves.
“Attention will now turn to the October Budget and the Government’s new Your First Home scheme, which could provide some welcome support for prospective first-time buyers. However, it comes at a challenging time for a fragile housing market, with weak buyer demand, higher mortgage rates and stretched affordability weighing on activity. One scheme alone will not turn the market around, and improving affordability and housing supply will be vital if market conditions are to improve.”
