Property Market Showing Signs of Resilience Amid Mortgage Rate Rises

Why It Matters

The data shows the UK property market can absorb higher borrowing costs, but a slowdown in new supply and reliance on earlier low‑rate deals could pressure activity if rates stay elevated. Understanding this balance is crucial for lenders, developers, and investors navigating post‑rate‑rise dynamics.

Key Takeaways

• 83% of movers took >4% mortgage rates in March, up from 58% Feb
• First‑time buyers made up 34% of sales, highest since 2006
• New listings fell 7% YoY, indicating waning seller confidence
• Only 16.8% of homes sold below asking, lowest since Sep 2025
• 44% of March sales locked in mortgage deals earlier this year

Pulse Analysis

The March Connells Group data underscores a surprising resilience in the UK property market amid a rapid rise in mortgage rates. While the average rate on new purchases hit 4.57%, a level not seen since April 2025, overall transaction volume slipped merely 2% year‑on‑year. This stability is largely driven by a surge in buyer willingness to accept rates above 4%, with 83% of movers doing so, reflecting a market that values homeownership enough to absorb higher financing costs. Lenders and policymakers should note that the steep month‑on‑month jump in rate acceptance is the sharpest since the 2022 mini‑Budget shock, indicating a potential ceiling for borrower tolerance.

First‑time buyers emerged as a pivotal force, representing 34% of all sales – the highest proportion in two decades. Their relative insulation from rate spikes, coupled with a modest increase in borrowing costs, helped cushion overall demand. Regional disparities, however, paint a nuanced picture: Scotland and London posted modest demand gains, while the North, Midlands, and especially the South East saw double‑digit sales declines. Supply constraints are evident as new listings fell 7% YoY, the steepest drop in almost a year, suggesting sellers are hesitant to list amid affordability pressures. Yet price erosion remains limited; only 16.8% of homes sold below asking, the lowest since September 2025, and average sale prices were just 1.5% under list.

Looking ahead, the market’s reliance on mortgage deals secured earlier in the year – 44% of March completions were locked in during January or February – raises concerns if rate reductions stall. Analysts anticipate a modest softening as the buffer from low‑rate contracts wanes, but a stabilising financial environment could allow rates to ease gradually. Stakeholders should monitor lender pricing strategies and consumer sentiment closely, as a sustained rise in borrowing costs may eventually dampen the current resilience, reshaping supply‑demand dynamics for the remainder of 2026.