House prices across the UK have surged close to record highs as the market shows signs of recovery and confidence returns to buyers, instigated by falling mortgage rates. According to Halifax, the average property price reached £293,399 last month, just shy of June 2022's peak of £293,507.
The data reveals prices have been climbing for three consecutive months, attributed to easing costs associated with borrowing, which has made mortgage debts more manageable for many potential buyers. Amanda Bryden, head of mortgages at Halifax, noted, "Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40% in the last year and now at their highest level since July 2022."
For the year, house prices have increased by 4.7%, marking the fastest growth rate since November 2022. This translates to about £13,000 added to the average property value over the past twelve months, following earlier declines. Looking back two years, price growth was nominal at only 0.4%, totaling just £1,202.
Guy Gittins, CEO of Foxtons estate agents, echoed this optimistic sentiment, stating, "The market is recovering. While it won’t be the best year on record, we are witnessing more buyers entering the market with each dip in interest rates, as they shake off last year's backlog of hesitance.”
First-time buyers, often the barometer for the UK housing market, are also feeling the pressure of rising prices. Recent findings show the typical first-time buyer now spends £232,769, up 4.2% from last year, equaling approximately £9,409 more since then. Nevertheless, this price still trails the average levels noted two years prior, where buyers were spending about £1,000 more.
Mortgage expert Karen Noye from Quilter expressed insight on recent trends, stating, "Currently, some lenders offer deals around the 4% mark, starkly lower than the 5% and above rates experienced following the 2022 mini-budget. This means buyers are now securing larger mortgages, making previously out-of-reach properties more attainable." On Monday, averages showed two-year fixed-rate mortgages standing at 5.38%, with five-year fixed deals at approximately 5.05%.
Across various regions, property price increases showcase significant disparity. Northern Ireland exhibited the most dramatic growth, soaring 9.7% year-on-year to average £203,593, followed closely by Wales at 4.4%, with properties there averaging £224,119. Scotland saw modest gains, incrementing by 2.1%, resulting in average prices of £205,718. The North West was another standout region within England, increasing property values by 5.1% to £234,355, whereas London retains its status as the nation’s most expensive market with averages hitting £539,238, reflecting a 2.6% increase compared to the previous year.
Market analysts suggest the current uptrend might be tempered by the challenges of borrowing and economic uncertainties. Bryden cautioned the need to view recent price gains within the broader timeline of market conditions, remarking, "While these gains are encouraging, we expect housing costs will still pose difficulties for many. Property price growth may remain modest through the end of this year and spill over to the next."
Tom Bill, UK residential research head at Knight Frank, offered clearer predictions, stating, "The past two years have emphasized the interplay between mortgage rates and house prices; as one increases, the other tends to decline. We foresee slight price growth as rates drift lower, but the upcoming Budget poses uncertainty."
The heightened activity within the property market hints at economic recovery, yet reflects visible strain for many first-time buyers trying to manage costs and find feasible options. Continuous monitoring of economic indicators, particularly mortgage rates, will provide insights as the market evolves.
