Housing market shows signs of resilience, but borrowers are feeling the squeeze

16 September 2026

If you are covering the latest UK house price index, please see the following comment from Ian Futcher, financial planner at Quilter:

"The housing market continues to show signs of resilience, with UK house prices rising by 1.4% over the year to July and increasing by 0.7% on a monthly basis. While transaction volumes remain relatively subdued, continued price growth suggests demand has held up despite the affordability challenges buyers continue to face.

"However, these figures reflect transactions agreed several months ago and may not fully capture the pressures now building in the mortgage market. Although the Bank of England is widely expected to leave the base rate unchanged at tomorrow's meeting, borrowers are already feeling the effects of a changing interest rate environment. Several major lenders have increased mortgage rates this week as swap rates and funding costs have moved higher, making borrowing more expensive for prospective buyers and those approaching remortgage. The longer the US and Iran conflict drags on and subsequently increases inflation the longer rates may remain high.

"That creates an increasingly difficult backdrop for the housing market. While a hold in the base rate may offer some reassurance, what matters most for buyers is the rate available on the mortgage products they need today. Higher mortgage costs reduce affordability, particularly for first-time buyers who are already grappling with elevated house prices and tougher lending criteria.

"The data also shows that markets where affordability is more stretched, most notably London, are struggling to generate the same momentum. With the average London property now worth £550,000 and prices down 3.3% annually, affordability constraints remain a significant drag on activity.

"Looking ahead, much will depend on whether this recent upward pressure on mortgage pricing proves temporary or becomes a more sustained trend. If lenders continue to raise rates despite the Bank holding fire, the market could face renewed strain as affordability deteriorates further. The underlying demand for homeownership remains strong, but higher borrowing costs risk making the path onto, or up, the property ladder even more challenging for many households."