Rising rates test confidence but housing activity holds firm

Aneisha Beveridge, research director at Connells Group, said: “March saw a cooling in confidence as mortgage rates edged higher again, but the housing market response has been more muted than the headlines around borrowing costs might suggest. The key issue hasn’t been rates moving back above 4% – something the market has already experienced – but the speed of that change. In just one month, the share of buyers securing a mortgage above 4% rose from 58% to 83%, the steepest month-on-month shift since the 2022 mini-Budget, prompting some households to pause.

“Even so, underlying activity has held up relatively well. Sales agreed were only 2% lower than a year ago, and first-time buyers continued to play a central role, accounting for 34% of all purchases in March – the highest share for any March on record. Many recent transactions have also been supported by buyers who secured lower mortgage rates earlier in the year, helping to cushion the immediate impact of higher costs.

“Where conditions have shifted more noticeably is on the supply side, with new listings falling 7% year on year as some sellers step back in response to the changing outlook. Despite that, pricing has remained firm, with the lowest proportion of homes selling below asking since late last year.

“As the boost from cheaper mortgage deals secured earlier in the year fades, activity may soften further in the near term while households adjust. However, financial markets have since stabilised. With fewer rate rises now expected, it should allow mortgage rates to ease back, albeit not to their level earlier in the year. If that pressure lifts, confidence is likely to rebuild, supporting a firmer footing for the market as we move through the year.”