UK house prices rise again after market downturn

Houses, UK.
Houses, UK. Copyright Canva.
By Eleanor Butler with AP
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UK house prices have risen for the second consecutive month in response to high demand and softening economic conditions.


House prices in the UK rose 0.5% in November after a 1.2% increase in October, according to data from mortgage provider Halifax.

The average house price of £283,615 (€330,780.17) was 1% lower than a year earlier, although the annual drop reached a low of -4.5% in both August and September.

October’s rise came after a six month unbroken stint of declining prices.

"The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand,” explained Halifax director Kim Kinnaird.

That said, dropping mortgage prices linked to stabilising economic conditions are having a marginal impact on activity in the sector, encouraging more people to buy homes.

CPI inflation continued to fall to 4.6% in October, down from 6.3% in September, and the Bank of England has been holding interest rates steady at 5.25%.

Whilst the UK’s growth forecast remains particularly pessimistic, it seems that easing conditions are filling lenders and buyers with slightly more confidence.

Nationwide, another mortgage provider, reported last week that house prices rose for a third consecutive month in November according to its data.

This figure is 2% lower than a year earlier.

"While a shallow recession and a rise in unemployment next year may cause a further modest fall in house prices, with the peak in mortgage rates behind us, prices may well have already bottomed out," said Imogen Pattison from Consultancy Capital Economics.

During the covid-19 pandemic, house prices in the UK soared as people began to look for larger properties and were incentivised to buy their homes because of tax breaks and low interest rates.

Between February 2020 and September 2022, the value of UK houses rose by 27%.

Following this, the market then began to suffer from rising mortgage costs linked to inflation and climbing interest rates.

Until the interest rate pause in September of this year, the Bank of England raised rates for 14 consecutive months to tackle the highest inflation seen in more than 40 years.

The price of fixed-rate mortgages has been falling since the end of July, and many homeowners on variable plans are waiting to see a reduction in their monthly contributions.

Experts are nonetheless advising that this relief won’t come soon, particularly given the Bank of England’s hesitancy to reduce interest rates, which influence repayments for those on variable schemes.

Victoria Scholar, Head of Investment at Interactive Investor, predicted that house prices are set to drop again next year, but added that the pace of decline will depend on "growing expectations that the central bank will actually loosen monetary policy in 2024, making borrowing rates more attractive, potentially stimulating demand”.

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