UK Housing Update | Market Update
UK Housing Market Update: Mortgage Rates Weaken Buyer Activity, According to Savills
According to Savills’ August 2026 Housing Market Update, higher mortgage rates are affecting UK housing activity, price growth and buyer confidence, with the market expected to remain subdued in the short term.
Mortgage Rates Are Holding Back Market Growth
Savills explained that higher mortgage rates are affecting both market activity and price growth. Volatility in mortgage rate pricing is also creating extra uncertainty for buyers and sellers. According to Savills, financial markets are continuing to price in two base rate rises over the coming months. The update links this expectation to wider uncertainty connected with the Iran conflict. As a result, Savills expects mortgage rates to remain too high to unlock stronger house price growth in the short term.Market message: Lower house price growth does not automatically mean the market becomes easier for buyers if mortgage rates remain high.
Economic Forecasts Are Less Negative
Savills also referred to Oxford Economics forecasts, which expect the Bank of England to keep the Bank Rate unchanged at 3.75% well into 2027. The reasoning is that the Bank of England may need to balance short-term inflation pressure with signs of longer-term weakness in the UK labour market. Inflation is expected to move back towards the Bank of England’s 2% target in 2027, assuming there is a lasting resolution to the ongoing conflict. If this outlook proves correct, Savills suggests the housing market may remain subdued in the near term, but with the possibility of stronger conditions next year.Buyer Activity Remains Below Normal Levels
Savills reported that the challenging mortgage market is feeding into lower levels of housing activity. Mortgage approvals for house purchases increased slightly in June, but remained 12% below the 2017–2019 average. Completed housing transactions, which usually lag mortgage approvals by around one to two months, were also 6% below the 2017–2019 average in June. This shows that although some activity continues, the market has not yet returned to normal pre-pandemic levels.Sales Agreed Improved in July, But Recovery Is Not Clear Yet
Savills cited 20CI data showing that sales agreed, net of fall-throughs, were 3% above the 2017–2019 average in July. This followed a weaker previous month, when sales agreed were 15% below the 2017–2019 average. However, Savills noted that July is usually a slower month. Therefore, a return to the 2017–2019 average in July does not yet prove that the sales market has fully recovered.Supply Remains High and Homes Are Taking Longer to Sell
According to Savills, levels of housing supply remain high and sales are slow. The update referred to Zoopla’s June reporting, which stated that around three fifths of homes placed on the market since the start of the year had not yet sold. This suggests buyers may have more choice, but it also shows that sellers may need to be realistic on pricing and presentation.Regional House Price Differences Remain Important
Savills highlighted that localised house price data from April showed stronger growth in Scotland and the North West. The strongest annual growth was reported in:- East Ayrshire: 12.6%
- East Dunbartonshire: 10.6%
- East Renfrewshire: 9.0%
- Kensington and Chelsea: -8.3%
- Hastings: -7.4%
- Newham: -6.9%
What This Means for Buyers
- Do not rely only on national house price headlines.
- Check local sold prices before making an offer.
- Understand how mortgage rates affect monthly affordability.
- Compare the full cost of ownership, not just the asking price.
- Be cautious about stretching your budget in an uncertain rate environment.
- Use slower market conditions to negotiate sensibly where appropriate.
What This Means for Sellers
- Pricing realistically is becoming more important.
- Buyers may be more cautious because of mortgage costs.
- High supply levels can increase competition between sellers.
- Clear property information may help serious buyers move forward faster.
- Homes that are overpriced may take longer to sell.
ADVAITH HOMES View
The Savills update suggests that the UK housing market is being shaped strongly by mortgage affordability rather than house price movement alone. For buyers, the key issue is not simply whether prices rise or fall slightly. The more important question is whether the monthly mortgage payment, deposit, buying costs and ongoing property costs remain manageable. For sellers, the message is also clear. Buyer confidence is more sensitive, and pricing must reflect current market conditions, not only past expectations.Key takeaway: According to Savills, higher mortgage rates are likely to keep the UK housing market subdued in the short term, even though there may be potential for stronger conditions in 2027.
Quick Summary
- According to Savills, UK house prices rose by 0.1% in July.
- Annual growth slowed to 1.8%, down from 2.2% in June.
- Higher mortgage rates are affecting activity and price growth.
- Mortgage approvals remain below the 2017–2019 average.
- Completed transactions are also below normal pre-pandemic levels.
- Supply remains high, and many listed homes have not yet sold.
- Regional differences remain significant across the UK.