House purchases delayed ahead of expected rate cut

For sale sign

Buyers are waiting for interest rates to come down before purchasing a new home, research suggests.

A regular survey of chartered surveyors found that demand for homes had weakened in May.

The Bank of England has kept the base rate at 5.25%, the highest level for 16 years, since last summer and any reduction will now come later than previously expected. Most analysts currently expect rates to be cut in August or September.

As confidence regarding an imminent cut in interest rates has ebbed, and high living costs continue to hit household finances, the Royal Institution of Chartered Surveyors (RICS) found that new buyer demand was down 8% in May compared to the flat picture reported in April.

Additionally, UK housebuilder Crest Nicholson issue a profit warning this week after seeing a slowdown in sales momentum which it said was due to volatile mortgage rates and buyers now expecting borrowing costs to drop later in the year.

“The recent recovery across the UK housing market appears to have slipped into reverse of late, with buyer demand losing momentum slightly on the back of the upward moves seen in mortgage rates over the past couple of months,” said Tarrant Parsons, RICS senior economist.

“Nevertheless, expectations point to this delaying, rather than derailing, a modest improvement going forward.”