Cost-of-living crisis puts the brakes on runaway house prices

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the publication of the Halifax House Price Index for January, which shows cost-of-living crisis puts the brakes on runaway house prices.

Key points from the publication:

• Monthly house price growth fell to 0.3% – the lowest since last June.
• Prices are still up 9.7% in a year, to a record high of £276,759.
• In December, we know that completed property transactions rose (HMRC – reflecting sales agreed in November), but agreed sales fell (RICS – reflecting sales that will complete in January and February).

Sarah Coles says:

“The cost-of-living crisis puts the brakes on runaway house price rises. Prices were still going up in January, but far slower than for the previous three months, and the number of sales dropped back to the kinds of levels we saw before the pandemic.

“Back-to-back interest rate rises haven’t moved mortgage rates far off their record lows, and with four in five mortgage holders protected by fixed rate deals, most haven’t yet faced the impact of rate increases. However, it’s persuading buyers to think twice about how they can afford higher house prices at a time of rising rates.

“At the same time, the looming threat of an incredible £693 hike in energy prices in April, coupled with tax hikes, and the rising cost of everyday essentials like petrol and food, means we’re worried about making ends meet as it is – let alone stretching ourselves to move up the property ladder.

“The Bank of England is committed to slow and steady interest rate rises through the year, so at the moment we don’t foresee the kind of rate shock that would send prices tumbling. However, we can expect monthly price rises to peter out, and annual rises to drop back as we go through 2022.

“If you need to buy a new home, there’s little point in trying to second-guess market movements to time a purchase perfectly, because there are so many unknowns that make it impossible to identify the ideal moment to buy until it has passed.

“However, it’s worth considering carefully how affordable the move is after rate rises and bill hikes, so you deal with the really difficult questions before you commit.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay