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Rising borrowing costs are beginning to test confidence in the UK housing market, although overall activity has remained relatively stable, according to new data from Connells Group.
The figures show that 83% of home movers agreed mortgage rates above 4% in March, up sharply from 58% in February, marking the steepest month-on-month increase since the market turbulence following the 2022 mini-Budget.
In addition, the average rate on a new property purchase rose to 4.57% – its highest level since April last year.
Despite this shift, buyer activity has proved more resilient than expected. Sales agreed across Great Britain were down just 2% year-on-year in March, suggesting many households have continued with transactions secured at earlier, lower rates.
Aneisha Beveridge, research director at Connells Group, commented: “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.
“Even so, the market has held up better than many feared. Buyer demand cooled modestly, but it didn’t fall away.”
First-time buyers played a significant role in sustaining activity, accounting for 34% of all sales in March – the highest proportion recorded for the month since 2006. This group saw the smallest increase in mortgage rates of any buyer type, while movers – particularly those trading up to higher-value properties – experienced the sharpest rise in borrowing costs as rates on lower loan-to-value products increased faster.
Applicant registrations fell by 4% year-on-year in March, reversing a modest increase in February. However, demand remains elevated compared with historic levels, with registrations still 17% higher than in March 2019.
Regional variations were evident, with Scotland and London recording annual increases in demand, while parts of the North and Midlands saw more pronounced declines as affordability pressures intensified. The South East experienced the largest fall in sales agreed, down 12% year-on-year.
Sellers appear to have responded more cautiously to rising rates. The number of new properties coming to market fell by 7% year-on-year in March, the sharpest drop in almost a year, indicating a softening in seller confidence.
Pricing, however, has remained firm. Just 16.8% of homes sold in England and Wales achieved below their final asking price in March, the lowest proportion since September 2025.
On average, properties sold for 1.5% below asking, suggesting limited downward pressure on values despite higher borrowing costs.
The data also highlights the extent to which recent activity has been supported by earlier mortgage deals. Around 44% of homes completing in March had mortgage offers agreed in January or February, while nearly half of buyers had secured deals as far back as 2025, when rates were lower.
“As the boost from cheaper mortgage deals secured earlier in the year fades, activity may soften further in the near term while households adjust,” said Beveridge.
“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,” she added.
“If that pressure lifts, confidence is likely to rebuild, supporting a firmer footing for the market as we move through the year.”
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