April Market Brief - Rising rates test confidence, but housing activity holds firm

• In March, 83% of movers agreed a mortgage rate above 4%, up from 58% in February, marking the steepest month-on-month shift seen since the 2022 mini-Budget (chart 1).
• The average mortgage rate secured on a new property purchase rose to 4.57% in March, its highest level since last April.
• Buyer activity has proved relatively resilient despite higher mortgage rates, with sales agreed down just 2% year-on-year in March as many households moved forward on pre-secured deals (chart 2).
• First-time buyers accounted for a record 34% of March sales – the highest share for any March since 2006.
• Seller confidence has softened more sharply, however, with new property listings falling 7% year-on-year, the biggest decline in almost a year.
• Even as mortgage rates rise, pricing remains firm – with the lowest share of homes selling below asking since late 2025.

Aneisha Beveridge, Research Director at Connells Group, said:

“What unsettled the market in March wasn’t so much the level of mortgage rates, which are broadly back to where they were this time last year, but the rapid change in direction and pace at which borrowing costs rose. That sudden shift inevitably caught some buyers and sellers off guard and led to a dip in activity.

“Even so, the market has held up better than many feared. Buyer demand cooled modestly, but it didn’t fall away, and sales levels remained relatively resilient – helped by the fact that many households were already progressing with cheaper mortgage deals secured earlier in the year. First-time buyers saw the smallest rate increases and consequently accounted for the highest share of March purchases on record. However, the clearest response has come from sellers, where confidence softened more visibly and fewer homes were brought to market.

“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.”

Rising mortgage rates

After easing at the start of the year, mortgage rates moved higher in March, reintroducing uncertainty into the market just as activity was beginning to pick up.

The average mortgage rate on a new property purchase rose to 4.57% in March, its highest level since last April. This marks a 0.29 percentage point increase from the low point seen in January, reversing some of the affordability gains that supported demand earlier in the year.

As a result, a growing share of buyers are now securing mortgages at higher rates. Eighty-nine per cent of new buyers took out a mortgage priced above 4% last month, broadly in line with the same point last year, but up sharply from 72% in January when rates were closer to recent lows (chart 1). More strikingly, the share of buyers taking out mortgages priced above 5% has tripled over the past month, rising from 6% in February to 19% in March.

While first-time buyers continue to face the highest rates due to smaller deposits and higher loan-to-value borrowing, it is movers who have seen the sharpest increase in recent weeks. Rates on lower-LTV products, typically used by homeowners trading up, have risen faster, narrowing the gap with higher-LTV loans. This matters most for family buyers and second steppers, where higher prices, larger mortgages and rising rates are increasingly constraining both affordability and willingness to move.

In March, 83% of movers paid a mortgage rate above 4%, up from 58% in February, marking the steepest month-on-month shift seen since the 2022 mini-Budget. By contrast, 94% of first-time buyers faced a rate in excess of 4%, up from 86% in February. While this remains a high share, the increase has been less dramatic than among movers. Meanwhile, 22% of first-time buyers paid a rate above 5% last month, broadly in line with this time last year, but triple the 7% recorded in January and February.

Activity cools as higher rates prompt a pause, rather than a pullback

Buyer activity softened in March as rising mortgage rates prompted some households to press pause on their homebuying plans, following a modest rebound earlier in the year.

After a 2% year-on-year increase in February, applicant registrations across Great Britain fell back 4% in March (chart 2). However, in the context of the last few years, this remains a relatively measured pullback. Even after March’s dip, applicant numbers are still 17% higher than in March 2019, indicating that underlying demand remains strong on an historic basis.

The slowdown was not felt evenly across the country. Scotland (+6%) and London (+3%) were the only two regions to see demand rise year-on-year in March, with the capital proving particularly resilient (chart 3). In fact, more buyers were looking to purchase a home in London last month than in any March since 2021, with demand driven by first-time buyers.

By contrast, some markets in the North and Midlands that had been among the strongest performers in recent years recorded the sharpest falls in demand, as affordability pressures and economic uncertainty began to weigh more visibly.

The number of sales agreed held up better than headline changes in buyer demand might suggest. Across Great Britain, sales agreed were just 2% lower than a year earlier in March, following a larger 4% year-on-year fall in February (chart 2). This resilience has been underpinned by first-time buyers. They accounted for 34% of all homes sold across Great Britain in March, the highest share of any March since our records began in 2006, reflecting how this group has continued to absorb higher rates and drive transaction volumes.

Given the sharp rise in mortgage rates over the last month, this degree of resilience is reassuring. However, around 44% of properties that exchanged in March had a mortgage offer agreed back in January or February, with nearly half of buyers (47%) having secured a deal as far back as 2025 when rates were lower than they are today. This highlights the extent to which recent transactions have been supported by buyers who locked in cheaper mortgage rates before costs rose. As these pipeline effects unwind, sales volumes are likely to soften further in the coming months, before stabilising and picking up later in the year, provided borrowing costs settle.

Regionally, the South East saw the largest annual fall in sales agreed (-12%), highlighting how higher mortgage rates tend to bite hardest in some of the UK’s least affordable markets (chart 3). In contrast, a number of Northern regions recorded year-on-year increases in sales agreed, continuing to benefit from comparatively lower price points and better affordability.

However, the clearest response to higher mortgage rates in March has come from sellers rather than buyers, with new instructions falling more sharply as confidence wavered. The number of new homes coming to market fell 7% year-on-year across Great Britain, the largest annual decline since April last year, shortly after the end of the SDLT holiday.

Despite fewer new listings, there remain around 40% more homes on the market than in 2019, reflecting the hangover from a weaker Q4 last year. This greater level of choice continues to benefit buyers but is also weighing on the time it takes to sell and, to a degree, on pricing power, particularly in markets where demand has cooled most sharply.

Pricing pressures

Despite the shift in mortgage rates, pricing across the sales market has remained firm, suggesting that demand has not yet weakened sufficiently to force widespread repricing.

Just 16.8% of homes sold in England & Wales last month sold for less than their final asking price, down from 17.9% in February. This is the lowest proportion since September 2025, underlining how resilient agreed prices have been even as borrowing costs have risen.

On average, homes sold for 1.5% less than their final asking price in March (chart 4). While this represents a slightly larger discount than the 1.0% recorded a year earlier, it remains smaller than at any point over the past five months.

The scale of discounting continues to vary noticeably by price point. Prime homes priced above £1m still see the largest negotiations, with the typical property selling for around 3.5% below its final asking price in March. However, it is the £500k–£1m segment that has experienced the biggest year-on-year increase in discounting.

In this upper-middle price bracket, homes sold for around 2% below their final asking price in March, compared with a 1% discount in March 2025. This segment is disproportionately made up of movers - often families upsizing - who have been among the most exposed to the recent jump in mortgage rates.