Britain's housing market lost momentum in May as the prospect of imminent rate cuts by the Bank of England faded, spurring a drop in buyer demand and house prices, a survey showed. The Royal Institution of Chartered Surveyors' monthly net balance of house prices fell to -17 from a downwardly revised -7 in April, marking the lowest reading since January.
Stronger-than-expected inflation data last month in Britain and the United States prompted investors to push back their bets on the start date for BoE rate cuts late into 2024. Previously the BoE's June 20 meeting had been regarded as a distinct possibility.
Mortgage rates offered to new buyers rose in response to the changed rate cut expectations. RICS' gauge of new buyer enquiries slid back to -8 in May from -1 in April, the lowest since November. Affordability is a hot political issue ahead of the July 4 national election, with house prices up by around a fifth since the last election in December 2019.
Both Prime Minister Rishi Sunak's Conservative Party and the opposition Labour Party, which is far ahead in the opinion polls, have said they will ramp up house-building if elected.
The recent recovery across the UK housing market appears to have slipped into reverse of late, with buyer demand losing momentum slightly on the back of the upward moves seen in mortgage rates over the past couple of months. Nevertheless, expectations point to this delaying, rather than derailing, a modest improvement going forward. The survey pointed to a robust increase in sales activity over the next 12 months.
