Rising mortgage costs driven by global uncertainty are beginning to weigh on borrower demand although a core base of needs-driven clients is keeping transactions moving, according to the latest data from Zoopla.

Average mortgage rates have climbed by 0.4 percentage points in the past month, with lenders pulling sub-4% deals as swap markets react to inflationary pressures linked to Middle East tensions.

The result is a noticeable slowdown in early-stage buyer activity, with enquiries down 13% year-on-year as prospective borrowers adopt a more cautious approach. However, completions and agreed sales are proving more resilient, falling just 2% annually.

The market appears to be increasingly dominated by borrowers with urgent housing needs, agreed mortgage offers, or significant equity – rather than discretionary movers.

CONVERSION RATES

The shift highlights a growing reliance on proceedable clients, with fewer speculative enquiries and more focus on conversion.

Regional trends show demand falling across all areas, with declines of up to 19% in some regions, while transaction levels remain comparatively stable – particularly in London, Wales and parts of northern England.

At the same time, a 6% rise in housing supply is giving borrowers more choice but also placing greater emphasis on affordability assessments as higher rates stretch budgets.

Cash buyers continue to account for around a quarter of transactions, while many mortgaged borrowers have secured funding ahead of recent rate increases – helping to cushion short-term impacts but masking underlying affordability pressures.

House price growth remains stable at 1.3% year-on-year, though the outlook is increasingly tied to the trajectory of mortgage pricing and swap rates over the coming months.

AFFORDABILITY STRETCHED

Richard Donnell, executive director at Zoopla, said: “The market remains active, but becoming increasingly reliant on a smaller pool of serious buyers. Some early-stage buyers are adopting a wait and see approach but there is a sizable group of committed buyers who are pressing ahead with housing purchases.

“If mortgage rates stabilise at current levels we expect sales activity to continue to hold up well compared to last year. Further increases in borrowing costs could weaken demand and impact sales volumes later in the year. The outlook is far from clear although we can see demand has stabilised over recent days.”

He added:  “For buyers, there is less competition and more choice, but affordability is becoming more stretched. For sellers, homes are still selling, but buyers are more selective and price-sensitive. Setting a realistic asking price with the help of a local agent will be critical to securing a sale.”

WAIT AND SEE APPROACH

Tomer Aboody, director of specialist lender MT Finance, said: “While committed buyers and sellers – who have their finance in place and have a clear desire to move – continue with their plans, those earlier on in the process are increasingly adopting a ‘wait and see’ approach due to wider geopolitical uncertainty, the threat of rising inflation and higher interest rates.

“While the average house price remains steady, the fall-off in demand is of far greater importance. We have seen a lack of desire from the government to help kick start or boost the property market, and if anything, it has helped create even tougher conditions.

 “The property market is the lifeblood of the UK economy, and until it is better supported, we will continue to see not only a stagnant property market, but also a stagnant economy.”

SHAKEN, NOT STIRRED

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: Although we may have feared the worst, bearing in mind the turmoil in the world and uncertainty over direction of travel for interest rates and inflation, so far the overwhelming majority of our buyers and sellers seem shaken but not stirred.

“There is no question the number of enquiries has dropped but the more serious buyers and sellers seem keen to get on with their moves. Worries about higher costs have inevitably filtered down into negotiations but so far a sense of realism is prevailing.

“Looking forward, we expect this new-normal to continue at least until it becomes more apparent how long hostilities will last.”