The UK housing market continued to show signs of a slowdown in June and property surveyors expect activity to remain subdued as higher borrowing costs hit new buyer enquiries.

According to new data released this morning by the Royal Institution of Chartered Surveyors (RICS), a net balance of -45 in a poll of its members reported a fall in new buyer enquiries last month, down from the -20 in May.

June’s reading – which represents the difference in percentage points between members seeing rises and falls in new buyer enquiries – was the most negative figure since a -51 in October last year in the aftermath of former prime minister Liz Truss’s  disastrous mini-budget.

There are fewer buyers actively looking to purchase property owed to surging mortgage rates, and this is driving down house prices.

Simon Rubinsohn, chief economist at RICS, said activity levels were likely to remain subdued in this environment.

He commented: “The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in the key RICS metrics regarding buyer enquiries, sales and prices which have all retreated over the past month.

“Inevitably in this environment, activity levels are likely to remain relatively subdued. However, an important message coming back from RICS agents is around ensuring prices are set with an eye on the market conditions of today, rather than the recent past; when this is done, sales are taking place.

“It is also worth bearing in mind that house prices are only very modestly down on their recent highs and well above where they stood prior to the onset of the pandemic.

“Further declines are possible but need to be seen in the context of the previous strength in the market.  Additional questions included in the latest survey also provide some support for the notion that, on balance, properties with better energy efficiency credentials are holding their value better than some others”.

Also reflecting on the data, Chris Druce, senior research analyst at Knight Frank, said: “June’s RICS survey shows that buyers were left shaken after lenders pushed up borrowing costs further in anticipation of the Bank of England hiking the base rate to 5%.

“Buyer numbers and agreed sales were down month on month, and expectations for pricing remain negative. While deals continue to be struck, buyers are clearly nervous and extremely price sensitive.

“More pain will enter the system in the coming months as another tranche of fixed-term mortgages are renewed at higher rates, and we can expect downwards pressure on pricing. Sentiment is ultimately unlikely to improve until we have surety about how high borrowing costs will go.

“However, when we do, demand could prove more resilient than expected given the cushioning effect of strong wage growth, record levels of housing equity, amassed lockdown savings, the availability of longer mortgage terms and forbearance from lenders.”