The number of home sales in September was 17 per cent lower than in the same month in 2022, according to HM Revenue and Customs (HMRC) figures.
Housing market experts said would-be buyers are struggling to save for deposits and are worried about mortgage rates.
Across the UK, an estimated 85,610 home sales took place in September 2023, which was also 1 per cent lower than in August.
“Although there are signs that the economy is recovering, the reality for many households is that they are still not able to afford to buy in the current climate," said Iain McKenzie, chief executive of the Guild of Property Professionals.
“Budgets are squeezed and some may have dipped into their deposit savings to get them through the cost-of-living crisis.”
Buyers remain cautious
In the financial year so far (April to September), an estimated 507,670 completed transactions have taken place.
This compares with 632,520 home sales during the same period a year earlier and 782,420 transactions between April and September in 2021.
“Despite an improvement in mortgage rates since the summer, transaction levels continue to be subdued as buyers remain cautious, adjusting their budgets to a higher interest rate environment," said Frances McDonald, director of research at Savills.
“Cash buyers have been taking an increasing share of the market, and those with existing housing equity or higher levels of wealth have been better able to transact in the current market."
Mortgage rates have jumped amid a string of Bank of England base rate rises, but there have been some recent signs of fixed-rates edging down amid expectations around inflation.
Strong wage growth may also help to support some transactions, although households remain squeezed by rising bills.
“Numerous interest rate rises have undoubtedly had an impact on activity, fuelling borrower concerns around affordability," said Jason Tebb, chief executive of property search website OnTheMarket.com.
"If the Bank of England holds base rate for the second consecutive meeting, this will give buyer confidence a much-needed boost, particularly as mortgage rates continue to edge downwards.”
All eyes on the Bank of England
The base rate is currently held at 5.25 per cent, but the Bank of England's Monetary Policy Committee will meet on Thursday to decide whether to increase it once more to combat inflation.
"Transaction numbers have slipped again in the face of higher interest rates and the cost of living, as borrowers reassess what they can afford to pay," said Mark Harris, chief executive of mortgage broker SPF Private Clients.
"All eyes are on the Bank of England to see whether they hold rates again at the coming meeting and allow the dust to settle.'
Matt Thompson, head of sales at London-based estate agent Chestertons, said: “Understandably, the majority of buyers have been particularly careful about their budget by factoring in any future rate hikes as well as the cost of living.”
Joshua Elash, director of property lender MT Finance, said: “Would-be homeowners continue to be put off by uncertain market conditions and a higher interest rate environment.”
Nick Leeming, chairman of estate agent Jackson-Stops, said: “Transactions remain consistent month-on-month, another indication that the market has shown stability in the face of wider economic challenges.
“However, there has been a gradual increase in the length of time it is taking from offer accepted through to completion. Particularly for longer chains that are reliant on multiple mortgages being approved and accurate valuations, the risk of fall-throughs only rises.”
