UK housebuilders face a further slowdown as rising mortgage costs squeeze affordability and mortgage approvals fall, UBS analysts Ami Galla and Julian Radlinger warned.
Average mortgage rates rose 0.3 to 0.6 percentage points between early September and 3 November, pushing the best five-year fixed deal for borrowers with a 10% deposit to 5.38%.
Mortgage approvals fell 19% year on year in September to 53,443, while property transactions slipped 4% to 94,800.
UBS said approvals had weakened considerably more than transactions, pointing to a clearer slowdown in demand in the months ahead.
House prices have so far been more resilient, with Nationwide's index falling 0.1% month on month in October but remaining 0.6% higher year on year.
However, new-home registrations fell 13% year on year in the third quarter, while brick volumes were down 17% on a rolling three-month basis in August.
The housing component of the UK construction purchasing managers' index remained in contraction at 40.7 in September, despite improving from 37.6 in August.
Consumer confidence added to concerns, with GfK's measure of willingness to make major purchases falling 14 points in October to minus 22.
Weakness was not uniform across the country, with sales activity remaining resilient in Scotland, Wales, north-west England, north-east England and Yorkshire and the Humber, while London lagged.
Government support offers a longer-term potential cushion through the £4.7 billion Your First Home programme, which is expected to deliver its first property sales in April 2027.
UBS believes the scheme could improve recovery prospects over the next two to three years, but its delayed start risks leaving the near-term outlook subdued.
