House prices are at their highest in two years and are back within a whisker of the records reached in the run-up to Liz Truss’s mini-budget.
With cheaper mortgage deals tempting would-be buyers back to the market, prices rose by 0.3 per cent in August, building on a gain of 0.9 per cent in July, according to Halifax, one of Britain’s largest mortgage lenders. By its calculations, prices have risen in each of the past five months.
The August rise, which was slightly stronger than the 0.2 per cent predicted by economists, takes the average UK house price to £292,505, the highest level since August 2022 and only £1,000 below the record set in June 2022.
“Recent price rises build on a largely positive summer for the UK housing market,” Amanda Bryden, the head of mortgages at Halifax, said. “Prospective homebuyers are feeling more confident thanks to easing interest rates.”
Compared with this time last year, house prices are 4.3 per cent higher, the strongest rate of annual growth recorded since November 2022. Nationwide, another high street lender, said last week that the annual rate of house prices inflation was running at its fastest since the end of 2022, although it estimated that prices were up by 2.4 per cent year-on-year. Halifax and Nationwide use slightly different calculations, but both agree that prices and the wider housing market have strengthened in 2024 after a two-year downturn.
Soaring mortgage rates and fears of a house price correction kept would-be buyers on the sidelines throughout the second half of 2022 and 2023. Prices have held firmer than many expected and mortgage rates have come down steadily after peaking last summer.
The renewed optimism has been reflected in the number of mortgage approvals, which is at its highest level in almost two years. Bank of England figures show that 61,985 mortgages were approved in July, 26.5 per cent more than in the same month last year.
Housebuilders and estate agents have reported that the market has swung back in their favour this year, albeit not to the levels recorded during the pandemic era “race for space”.
“Affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs,” Bryden said. “However, with market activity picking up and the possibility of further interest rate reductions to come, we expect house prices to continue their modest growth through the remainder of this year.”
Ashley Webb, at Capital Economics, the consultancy, said the Halifax data “supports our view that the housing market isn’t on the precipice of a new downturn. Admittedly, we don’t expect house prices to rise much further this year, either, but if we’re right to think that interest rates eventually will fall from 5 per cent now to 3 per cent, the resulting drop in mortgage rates should boost demand and give house prices renewed impetus next year. That may mean house prices rise by about 5 per cent in 2025.”