Halifax: UK house prices pass post-pandemic peak
House prices have beaten the previous pandemic peak but borrowing constraints could provide a challenge for buyers if rates are cut more slowly than expected, Halifax has warned.
The latest Halifax House Price Index showed average house prices rose for the fourth consecutive month in October by 0.2% to £293,999.
Annual growth slowed from 4.6% in September to 3.9% in October ahead of the Budget but prices are now above the June 2022 pandemic peak of £293,507.
Amanda Bryden, head of mortgages for Halifax, said:
“That house prices have reached these heights again in the current economic climate may come as a surprise to many, but perhaps more noteworthy is that they didn’t fall very far in the first place.
“Despite the headwind of higher interest rates, house prices have mostly levelled off over the past two and a half years, recording a 0.2% increase overall.
“That’s a significant slowdown compared with the 21% rise we saw in the equivalent period from January 2020 to the summer of 2022.
“Despite the affordability challenge, market activity has been improving.
“The number of new mortgages agreed recently reached its highest level in two years.
“This aligns with average mortgage rates dropping steadily since spring – now over 160 basis points lower than in summer 2023 – coupled with continued positive income growth.
“Looking ahead, borrowing constraints remain a challenge for many buyers.”
Bryden added that following the Budget, markets expect the Bank of England to cut rates more slowly than previously anticipated, which could keep mortgage costs higher for longer.
Bryden concluded:
“New policies like higher Stamp Duty for second home buyers and a return to previous thresholds for first-time buyers might also affect demand.
“While we expect house prices to keep growing, it will likely be at a modest pace for the rest of this year and into next.”
Commenting on the index, Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said:
“The Bank of England rate reduction in August boosted buyer confidence, leading to an uptick in applicant registrations, viewings, and offers, contributing positively to our fourth quarter revenue.
“A further rate drop today would likely encourage more vendors to sell and buy, encouraging people off the fence.
“With the Budget behind us, we now have greater certainty.
“We are cautiously optimistic but concerned about the future Stamp Duty rate change for first-time buyers.
“Do they realise how long it takes to complete a purchase?
“If the Bank does cut rates today and the mortgage market reacts positively, first-time buyers should seriously consider making their move to agree a purchase before Christmas, as delays could prove costly.”
Tom Bill, head of UK residential research at Knight Frank, said:
“The interest rate landscape has become more adverse than a fortnight ago, which will increase downwards pressure on house prices in the short-term.
“The Budget signalled higher levels of public borrowing and swap rates have jumped since the start of last month.
“The impact of a Trump presidency on UK interest rates is harder to predict.
“While the new President’s economic plans may prove inflationary, the UK’s appeal among investors could grow, potentially putting downwards pressure on rates in the longer term.
“For now, anyone deciding whether to fix for two or five years must consider whether they think Labour’s revenue-raising plans will work or more rate turbulence lies ahead during this Parliament.”
Nathan Emerson, chief executive of Propertymark, added:
“Following the recent Budget there is potential the housing market may see an increased momentum across the winter months, as buyers potentially look to make their move ahead of proposed Stamp Duty increases from 1 April 2025.
“Increases will impact buyers across England and Northern Ireland, with some seeing Stamp Duty costs typically increase by around £2,500.
“However, it remains important to view the wider picture and that continued house price growth, even in the short to medium term, will help offset such tax expenditures for the highest percentage of those looking to purchase after the threshold change date.”
Kindly shared by Estate Agent Today
