UK Home Buyers Need Higher Deposits as Mortgage Rates Rise

UK homebuyers now require an average of £18,200 more in deposits than they did in January 2026 to maintain the same monthly mortgage repayments. This shift follows an increase in average five-year fixed mortgage rates from below 4% to approximately 4.8%, a trend linked to inflation expectations stemming from the Iran war.

Zoopla reports that the impact is most severe in London, where buyers need an additional £35,500 in deposits, contributing to a 1% drop in London house prices as of July. In contrast, buyers in the North East require £10,200 more. While prices have fallen in London and the South East, they continue to rise in the North and West Midlands.

Despite a 6% year-on-year decline in total home sales, online home searches have risen 7% nationwide and 7.3% in London. This activity follows a mid-July low point, suggesting a return to the market ahead of a seasonal autumn rebound. Analysts expect house price growth to slow toward zero as borrowing costs remain high and uncertainty persists regarding the autumn budget. While the Bank of England is considered unlikely to hike rates soon due to labor market weakness, mortgage rates remain roughly a percentage point higher than before the Middle East conflict began.