UK house prices are on the rise again, showing monthly and yearly growth due to improved market conditions.
- In September, house prices rose by 0.3%, matching August’s increase, with a notable annual growth of 4.7%.
- The average house price is nearing its highest point, with current values just £100 below the record set in June 2022.
- Improving wage growth and falling interest rates have made mortgages more affordable, boosting buyer confidence.
- Regional disparities exist, with Northern Ireland experiencing the highest growth at 9.7%.
According to Halifax, one of the UK’s leading mortgage lenders, house prices have incremented by 0.3% in September, mirroring the growth observed in the previous month, August. Over the past year, the figures have surged by an impressive 4.7%, marking the most substantial annual inflation rate since November 2022. The average home value across the UK is now £293,399, just £100 less than the record peak in June 2022. This increase contrasts starkly with the downturn caused by the mini-budget from Liz Truss and Kwasi Kwarteng, which previously disrupted the housing market by elevating borrowing costs dramatically.
Halifax’s head of mortgages, Amanda Bryden, urged caution in interpreting these gains as a full recovery, pointing out that “the typical property value has risen by around £13,000 over the past year, largely recovering the ground lost in the previous 12 months. Looking back two years, prices have increased by just 0.4%.” The recent uptick follows a period of increased demand for larger homes and outdoor spaces after the lockdown era, but was notably slowed by adverse fiscal policies that escalated interest rates and mortgage costs.
Market dynamics have shown a positive shift over recent months, with the summer and early autumn bringing improved conditions. Mortgage affordability has been bolstered by robust wage growth and declining interest rates, aspects that have notably enhanced potential buyers’ confidence. Bryden highlighted a 40% rise in mortgage agreements over the last year, the highest since July 2022.
However, a stark difference in house price growth exists across regions. Northern Ireland leads with a remarkable 9.7% increase over the past year, while the northwest of England saw a 5.1% rise. Meanwhile, Yorkshire experienced a 4.3% increment. Conversely, regions such as Eastern England, inclusive of commuter-heavy Hertfordshire and Essex, saw more modest increases at 2.3%.
In London, known for its pricey real estate, prices inched up by 2.6% year-on-year, with the average property now costing £539,238. This remains below the peak value of £552,592 noted in the summer of 2022. While conditions are getting more favorable with receding mortgage rates, Bryden warned that affordability challenges persist for many, hinting at modest gains in the near future.
Contrary to the cautious outlook, some experts express optimism about the market’s potential trajectory. Ashley Webb, an economist at Capital Economics, anticipates the Bank of England will cut rates more aggressively than anticipated, potentially prompting a greater house price surge in 2025 than is currently forecasted. Webb opined, “Our view that the Bank of England will cut interest rates by more than most expect may mean house prices grow by an above-consensus 5% in 2025.” The coming months are pivotal in assessing whether these positive trends will continue amid ongoing economic uncertainties.
The trajectory of UK house prices will largely depend on evolving economic conditions and interest rate policies.
