The outlook for UK housing sales has fallen to its lowest level since July 2023, the Royal Institution of Chartered Surveyors (RICS) reported, as rising mortgage rates push buyers out of a market that continues to cool.

The finding comes from RICS' latest UK Residential Market Survey, which captured October data showing subdued demand and falling agreed sales across the country. Respondents now expect both sales activity and prices to soften over the next twelve months, the institution said.

What does the survey actually show?

The October reading marks the weakest sales outlook in more than three years. Several indicators moved in the same direction:

• New buyer enquiries have remained flat since September, with "virtually all parts of the UK reporting either falling or stagnant demand."
• The decline in agreed sales worsened during the month, falling to its lowest level in three months.
• Expectations for sales over the coming twelve months dropped to what RICS called "the most pessimistic assessment since July 2023."

Price trends varied by region. London, East Anglia, the West Midlands and the South East all recorded weaker housing price performance than the headline UK average.

Why are mortgage rates rising again?

The survey lands days after a consequential shift in monetary policy. Last week the Bank of England's Monetary Policy Committee raised interest rates for the first time since mid-2023, lifting the benchmark from its previous level to four per cent. Policymakers also warned that a further hike was on the cards.

Tarrant Parsons, head of market research and analysis at RICS, said demand for buying houses "remains subdued" and that survey respondents were "bracing for a weaker year ahead for sales given the persistent macroeconomic challenges being faced."

Parsons tied the housing slowdown directly to the rate path. "The Bank of England's rate rise was accompanied by a clear warning that policy may need to tighten further if higher energy costs feed through into wider prices," he said. "With inflation now projected to approach five per cent next year, mortgage rates are likely to remain elevated for longer, thereby continuing to weigh on the market."

What is driving the shock — and where is the potential relief?

Analysts traced the roots of the mortgage squeeze beyond UK borders. Tom Bill, head of UK residential research at Knight Frank, said the slump in buying confidence "shows how decisions in Washington not Westminster are shaping the outlook for the UK housing market."

Bill attributed the pressure on sales volumes and prices this year to "the energy price shock caused by the Middle East conflict," which has fed through into rising mortgage rates.

He also flagged a potential turning point tied to American politics. There "is growing pressure on Donald Trump to find a diplomatic solution following the mid-term elections, which means borrowing costs have started edging lower over the last week," Bill said — a trend that "would only accelerate if a lasting ceasefire was agreed."

For now, the arithmetic facing buyers remains unforgiving. With the Bank rate at four per cent, inflation forecast to near five per cent next year and a further hike possible, the survey points to a market still searching for its floor.