Halifax has recently announced a noteworthy development in the housing market, revealing that house prices have seen a rise for the first time in six months. According to the UK’s largest mortgage lender, property values experienced a 1.1% increase in October, with the average property price reaching £281,974. However, this increase is attributed to a shortage of available homes for sale, as demand from potential buyers remains lackluster. Despite this short-term upturn, the Halifax anticipates a decline in house prices until 2025, driven by the expectation of higher interest rates and rising living costs.
Compared to the same period last year, house prices in October were down by 3.2%, according to the Halifax’s data. Kim Kinnaird, the director of Halifax Mortgages, noted, “Prospective sellers appear to be taking a cautious stance, resulting in a limited supply of homes for sale. This is likely to have bolstered prices temporarily, as opposed to being fueled by strong buyer demand, which continues to remain weak overall.”
Cautionary Outlook Predicts UK House Price Decline Until 2025. Until recently, the Bank of England had been steadily raising interest rates to combat surging inflation, leading to increased mortgage rates for homeowners. Although the Bank has since maintained the current rate of 5.25% in its last two meetings, there are no immediate plans to lower rates. In light of this economic landscape, the Halifax forecasts a continued decline in house prices, with a potential return to growth expected in 2025.
Nonetheless, the Halifax emphasized that the recent price drops come after a prolonged period of price increases, with average house prices still approximately £40,000 higher than pre-pandemic levels. The data revealed that house prices across all UK nations and regions have seen a decline compared to the previous year, with the most significant drop occurring in south-east England, where prices fell by 6%. In contrast, Scotland experienced the smallest decrease, with only a 0.2% decline over the year.
Despite the overall subdued demand for housing, the first-time buyer market has remained relatively resilient. The Halifax noted that purchasing a first home continues to be an attractive option, especially in light of rising rental prices.
This increase in house prices in October aligns with the findings of a competitor, the Nationwide, which reported a 0.9% price rise last month. However, the Nationwide underlined that prices still remain lower than the previous year, and the housing market activity is characterized as “extremely weak,” with buyers grappling with elevated mortgage rates.
Both the Halifax and Nationwide base their survey data on their own mortgage lending, which does not encompass cash purchases or buy-to-let transactions. Current official data suggests that cash buyers represent more than a third of housing sales.
Sarah Coles, head of personal finance at Hargreaves Lansdown, remarked that potential buyers continue to be in short supply, with little indication of an imminent change. She added that the “miserable” number of approved mortgages in September, as indicated by Bank of England figures, suggests that the market will remain subdued. She believes that a significant shift in mortgage rates may be required to rekindle enthusiasm in the market. On the other hand, Sam Mitchell, the head of online estate agent Purplebricks, pointed out signs of mortgage lenders starting to compete for customers. He highlighted recent rate reductions by Halifax and Virgin, which he finds encouraging and anticipates a positive outlook for 2024, particularly as it is typically a quieter time of year for the housing market.