All eyes are on the Bank of England's policymakers who meet early in May to decide whether interest rates stay the same or rise again. Market watchers have suggested next month could be the time when the Bank raises its base rate again from 0.5 percent.
The last rise came in November, but that was the first upward move in interest rates since the 2008 financial crash. Changes in the base rate influence the interest rates that lenders use when offering funding to home buyers.
While there has been some speculation that a rise of 0.25 percent might be on the cards, flattening demand in the housing market means policymakers might be less inclined to put the base rate up.
The monthly market report from the Royal Institution of Chartered Surveyors (RICS) said demand from buyers had fallen for the 12th month in a row in March. New sales instructions also fell for the seventh consecutive month. According to the report, the number of properties on estate agents' book remain at "historically low levels".
Drop in household spending has knock-on effects
With fewer properties on the market and subsequently fewer buyers looking for a mortgage, that means household spending has dropped with the inevitable knock-on effect of that in the wider market as well as for specific property-related industries such as removal firms, estate agents and conveyancing solicitors.
There are 9.2 million households with a mortgage in the UK. Around half of those mortgages are on a variable or tracker rate that would change if the base rate rises or falls.
The RICS monthly survey asks property professionals such as estate agents and surveyors to gauge the activity they see in the market. According to the March report, demand and prices have fallen in London, the south-east, East Anglia and the north-east, while other regions reported price increases and increased demand for property.
Regional split on demand and pricing
Simon Rubinsohn, the RICS chief economist said: "The latest RICS results provide little encouragement that the drop in housing market activity is likely to be reversed any time soon.
"Apart from the implications this has for the market itself, it also has the potential to impact the wider economy, contributing to a softer trend in household spending. This could make Bank of England deliberations around a May hike in interest rates, which is pretty much odds-on at the moment, a little more finely balanced that would otherwise be the case.
"The downshift in sales for the time being continues to be more visible in London and the south-east with many of the other parts of the country continuing to show rather greater resilience. Feedback on expectations regarding transactions suggests this divergence will persist over the coming months."
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