Rosalind Evans
Halifax reports a 4.6% decrease in house prices as elevated interest rates curb the enthusiasm of potential buyers.
The UK housing market has witnessed its most significant yearly decline in 14 years, attributed to the summer’s seasonal downturn and the burden of rising mortgage expenses.
Halifax, the UK’s leading mortgage provider, has revealed a 4.6% price reduction for August, marking the most substantial year-to-year fall since 2009.
This indicates a decrease of approximately £14,000 in the average UK home price over the past year, bringing it down to £279,569. Despite this decline, average prices remain £40,000 more than pre-pandemic levels, which saw an increased demand for more spacious homes due to lockdowns.
The present decline implies that homeowners remain discouraged by high interest rates, a measure implemented by authorities to tackle inflation, resulting in escalated mortgage costs.
Since December 2021, the Bank of England has boosted interest rates 14 times, reaching 5.25%. According to recent Moneyfacts data, this has elevated the average two-year fixed mortgage rate to roughly 6.67%.
Kim Kinnaird, the Halifax Mortgages director, pointed out that the traditional house buying deceleration during summer contributed to the previous month’s downturn. “The market always slows in August, but the swift rise of mortgage rates in June and July added to this. Even though these rates did stabilize recently, they’re still significantly higher than in past years. This likely encouraged potential buyers to hold off, hoping for more predictable rates in the near future,” said Kinnaird.
She continued, stating that the market is adjusting and will settle at a point where buyers are at ease with the heightened mortgage costs, a situation unfamiliar in the past 15 years.
Halifax anticipates a continued drop in real estate prices in the upcoming year. Kinnaird believes this might be good news for those aiming to enter the housing market, considering the wage increase provides them more financial leverage.
“Recent times have witnessed a stable growth in income, causing the house price-to-income ratio for new buyers to decrease from 5.8 in the previous June to a current 5.1. This affordability, the best since June 2020, will somewhat counterbalance the effects of the soaring mortgage expenses,” commented Kinnaird.
Bank of England’s governor, Andrew Bailey, expressed that UK interest rates might be reaching their zenith, hinting at the potential end of the current rate increments cycle. Nevertheless, it’s anticipated that the Bank will augment the rates in their upcoming policy assembly on 21 September, moving them up by 0.25% to 5.5%.
As the UK grapples with changing economic landscapes and housing market dynamics, the immediate future for homeowners and prospective buyers remains uncertain. While homeowners might be concerned about diminishing property values, potential first-time buyers could see a silver lining amidst the shifting sands. The housing market, often a reflection of broader economic trends, will continue to be a vital indicator of the country’s financial health and stability in the coming months.
