Mortgage rate uncertainty continues to weigh on the UK housing market, although sales activity indicators have edged away from their recent lows, according to the latest RICS UK Residential Market Survey.
The August survey found that new buyer enquiries and agreed sales remained in negative territory, but both measures improved during the month. RICS said the wider macroeconomic environment remained challenging, with changes in interest rate expectations likely to hinder any emerging recovery in the sales market.
Despite this, forward-looking sentiment was more stable. Respondents indicated a broadly neutral outlook for activity in the near term, while expectations for sales volumes over the next 12 months moved further into positive territory.
Mortgage rates uncertainty continues to affect demand
New buyer enquiries recorded a net balance of -19% in August. While this continues to indicate weak underlying demand, it was the least negative reading since January and represented the fifth consecutive monthly improvement in the series.
Agreed sales also remained subdued, with a net balance of -17%. This was the least negative reading since February and marked a further improvement from the recent low of -38% recorded in April.
The near-term sales expectations balance improved from -13% to -3%, placing it broadly in neutral territory. Looking further ahead, the 12-month sales expectations balance rose from +3% to +6%, suggesting a modest increase in the number of surveyors expecting sales volumes to rise.
The supply of new properties coming to market remained broadly unchanged. New vendor instructions recorded a net balance of zero in August, compared with -2% in July.
However, market appraisal activity remained weaker, with a net balance of -17% compared with the same period a year earlier. RICS said the combination of these measures suggested that the pipeline of new sales listings was unlikely to expand materially in the immediate future.
House prices
House prices continued to face downward pressure. The headline price balance improved marginally from -29% to -28%, while the measure has now become less negative in each of the past four surveys following its recent low of -35% in April.
London continued to record a sharper rate of decline than the UK average, although its latest reading was less negative than in July. Northern Ireland continued to record price growth, while the North West of England has also experienced a sustained period of gentle house price growth in recent months.
RICS respondents continued to expect some further price weakness over the next three months. Over a 12-month horizon, however, the national outlook was broadly stable, although London, East Anglia, the South East, Yorkshire & the Humber and the South West continued to record slightly negative price expectations.
Rental market remains supported by limited supply
The lettings market presented a stronger picture, with 18% more surveyors reporting an increase in tenant demand than a decrease during August.
At the same time, new landlord instructions remained constrained, recording a net balance of -14%. The combination of stronger tenant demand and limited supply continued to support rental prices.
Short-term rental price expectations also strengthened during the month. The net balance of respondents expecting rents to increase over the next three months rose to +44%, compared with +33% in July.
Looking further ahead, surveyors expect UK rents to increase by around 3% on average over the next 12 months.
Louise Apollonio, Sales and Distribution Director, Retail Mortgages at Shawbrook, said: “While it is positive to see improvements in new buyer enquiries and agreed sales, a sustained recovery is likely to take time. Ongoing uncertainty around interest rates and energy prices is understandably making both buyers and sellers more cautious as we move into the autumn.
"Attention will now turn to the Autumn Budget, although significant changes to property taxes appear unlikely. The speculation may cause some aspiring homeowners to take a wait-and-see approach. For those planning to buy in the near future, speaking to a broker early remains essential to understand their options and help avoid unnecessary challenges further down the line.”
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “Rents are expected to rise by around 3% over the next 12 months, adding to the cost of living pressures for renters. Tenant demand is getting stronger at the same time new buyer enquires are weak, and looking ahead, sales listings are not expected to materially change over the short term.
“Affordability issues are glaringly obvious amid the lack of more affordable housing, yet this is not helped at a time where mortgage rates are rising. The Moneyfacts Average New Mortgage Rate has risen to 5.62%, up 0.72% since the start of March 2026 when it stood at 4.90%. Major lenders, which include HSBC, NatWest, Barclays, Lloyds Bank, Santander and Nationwide have all increased rates since the start of September, and there could well be a second wave of rises if swap rate volatility is prolonged.
“There will be some prospective buyers deciding it is a safer bet to continue in the private rental market for now, but with the RICS landlord instructions indicator remaining in negative territory, there is the obvious danger that tenant demand continues to outstrip supply, putting prolonged upward pressure on rents.”
