In October, UK house prices reached a record high, with the average property price climbing to £293,999, according to the latest figures from Halifax, one of the UK’s largest mortgage lenders. However, the monthly increase of just 0.2% marks the slowest rise in the past three months, reflecting a cautious housing market influenced by persistent economic pressures and concerns over rising interest rates.
Halifax’s report notes that the October price increase aligns with economists’ forecasts, as indicated in a recent Reuters poll. Year-on-year, house prices rose by 3.9%, representing the smallest annual growth since July. This slower growth trend emerged after the Labour Party’s election victory, when the newly formed government hinted at tough economic measures aimed at stabilising the British economy. This backdrop has cast some uncertainty over the housing market, tempering consumer confidence and keeping potential buyers cautious.
Factors Influencing the Housing Market
Despite the uptick in average house prices, several factors are shaping a subdued outlook for the housing market. The Bank of England (BoE) has raised interest rates multiple times to combat inflation, creating a headwind for prospective buyers who now face higher mortgage costs. Although the BoE is expected to lower its benchmark interest rate soon, the anticipated rate cuts may not be as aggressive as previously hoped. This, combined with last week’s budget announcement detailing increased taxes on home purchases, suggests that demand for housing may remain modest in the coming months.
Amanda Bryden, Halifax’s Head of Mortgages, explains, “House prices have largely stabilised since mid-2022, despite the pressures of rising interest rates.” She adds that while prices are expected to continue growing, the pace will likely remain restrained as economic uncertainties persist. Bryden believes that while there will be growth in the market, it will be incremental, and buyers should not anticipate sharp price increases in the near future.
What’s Next for UK House Prices?
With the BoE’s next interest rate decision due on Thursday, industry experts will be watching closely to gauge the potential impact on mortgage rates and housing demand. While the central bank is forecast to make only a modest rate cut, the recent budget’s unexpected borrowing and spending measures have led investors to reduce their expectations for further rate reductions before 2025. This conservative outlook may influence the housing market’s performance over the coming year.
In summary, while UK house prices have achieved a new record high, growth is likely to remain measured. Buyers and sellers should prepare for a market shaped by gradual price increases, moderated by cautious economic policies and interest rate decisions.
Source: (Investing.com, Reuters)
