House prices on the slide, tipped over the edge by mortgage hikes

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the latest ONS House Price data and the Land Registry data for December, showing house prices on the slide, tipped over the edge by mortgage hikes.

Key points from publications:

• • House prices fell 0.4% between November and December (non-seasonally adjusted). 
  • Average house prices were up 9.8% in the year to December – down from 10.3% in November.
  • The average house price hit £294,000: £26,000 higher than a year earlier, but down slightly from the record high of £296,000.
  • London house prices hit £543,000, but are up just 6.7% in a year.

Sarah Coles says:

“House prices were on the slide in December, and this is just the start of what’s likely to be an increasingly slippery slope.

“Prices were tipped over the edge by mortgage hikes, and we can expect momentum to sustain monthly slides until eventually the annual figures hit negative territory.

“There’s plenty of disagreement over how far they’ll fall – and how long for – but there remains a broad consensus that we’re heading downhill.

“It seems ridiculous, but it has taken until now for us to see early signs of the impact of September’s mini-budget in the official figures.

“Sales typically take around three months to complete, but at the moment they’re taking closer to four. It means December’s completion figures reflect how the market was looking in September and October. This covered the onset of the mini budget mortgage mayhem.

“However, even at this stage it won’t have captured the full impact of mortgage rate hikes, because an awful lot of people making buying decisions at this point had already agreed a mortgage at a much lower rate.

“Instead, we’re seeing the impact on their confidence that they could continue to pay the mortgage in future.

“The full effect of the mini-budget is clearer in mortgage approval data for future purchases.

“The number of approvals have been dropping since September, and hit 35,600 in December – the lowest level since the market was effectively closed in May 2020.

“The Nationwide and Halifax indices showing house prices among those approvals have also recorded monthly falls for four months, and the annual rise was less than 2% in January.

“Commentators are divided on when annual house price rises will turn negative, and how far prices will fall, which makes it a tricky time to  make buying or selling decisions.

“Anyone who can afford to wait may well decide to put it off until at least the spring. By then fixed mortgage rates may well have fallen further, and we’ll have a better idea of house price movements.

“If they’re on a slow slide it may not be so off-putting.

“If they’re falling faster it might encourage some buyers to hold off for even longer, while others will seize the opportunity to negotiate a decent discount and bag a bargain.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay