UK mortgage rejection rates rise as buyer demand weakens
UK mortgage rejection rates climbed to 9.44% in the first half of the year, compounding affordability pressures as buyer enquiries weaken and house prices face renewed downward pressure.
Mortgage rejection rates in the UK rose to 9.44% in the first half of the year, up from 8.93% the previous year. This tightening of credit is constraining buyer purchasing power amid a fragile housing market where demand is weakening.
Buyer demand weakens amid affordability pressures
New buyer enquiries slipped further into negative territory in September, recording a net balance of -22%. This marks a deterioration from -18% previously, though it is an improvement from the -41% balance seen six months prior. Higher mortgage rates and the rising cost of living are creating a significant affordability squeeze. Buyers who can still afford to proceed, however, have more bargaining power due to weak demand and pressured house prices. First-time buyers with a sizeable deposit might find more affordable homes, but higher mortgage rates risk undermining that potential boost.
A typical mortgage repayment is now almost £2,000 more per year compared to the start of 2026. Finance Expert Rachel Springall noted that based on the current Moneyfacts average five-year fixed rate of 6.00%-the highest point in three years-a borrower with a £250,000 mortgage over 25 years would face monthly repayments of £1,611. At the start of 2026, the average rate was 4.91%, resulting in repayments that are £163 less per month.
Rental market faces growing pressure from tenant demand
Tenant demand is accelerating, with a net balance of +23% marking a third consecutive month of growth. Landlord instructions remain scarce, increasing pressure on the rental market. Those planning to buy a home may remain in the private rental sector longer due to high mortgage rates, adding further pressure to tenant demand. With a net balance of +37%, expectations indicate rents will rise over the next three months.
House prices under renewed pressure with mixed supply signals
The supply of homes coming onto the market saw a modest uplift in September, with new instructions recording a net balance of +6% according to the Royal Institution of Chartered Surveyors (RICS). This is the first time since mid-2025 that new instructions moved into positive territory. Despite this, house prices are under renewed pressure. The RICS house price balance slipped from -28% to -32% in September. The latest Nationwide House Price Index showed annual house price growth halved from 1.6% in August to 0.8% in September.
The near-term outlook remains weak, with further downward price pressure expected over the next three months. Expectations over the next 12 months point towards a broadly flat market. Conditions vary considerably across the UK. North London estate agent and former RICS residential chairman Jeremy Leaf said, "Rising interest rates are adding to the burden on borrowers and making it more difficult for potential buyers to secure mortgages."
Policy attention turns to October Budget and first-time buyer support
Market attention will turn to the October Budget and the Government’s new Your First Home scheme, which could support prospective first-time buyers. The scheme launches at a challenging time for the fragile housing market, with weak buyer demand, higher mortgage rates, and stretched affordability weighing on activity. Analysts suggest one scheme alone will not turn the market around; improving affordability and housing supply will be vital for a sustained improvement.
