UK House Prices Near Record Highs Amid Improving Market Conditions

The average house price in the UK has come remarkably close to reaching a record high, boosted by falling mortgage rates that have restored buyer confidence, according to recent data from Halifax. The country’s largest mortgage lender reported that the average price in September hit £293,399, just shy of the previous record of £293,507 established in June 2022.

Halifax noted that house prices have now risen for three consecutive months, signaling an improvement in market conditions. Amanda Bryden, head of mortgages at Halifax, explained that “mortgage affordability has been easing thanks to strong wage growth and declining interest rates.” This shift has led to a surge in buyer confidence, with the number of mortgages agreed upon increasing by over 40% in the past year, reaching its highest level since July 2022.

Year-over-year comparisons show that house prices have risen by 4.7%, marking the fastest growth rate since November 2022. This increase can partly be attributed to the significantly lower activity in the market a year ago. The average property value has risen by approximately £13,000 over the past year, reflecting a rebound from prior declines.

In a broader context, prices have increased only modestly by 0.4% over the past two years, equating to about £1,202, according to Halifax. This indicates a market that, while recovering, has not returned to the rapid growth seen in previous years.

Guy Gittins, chief executive of Foxtons estate agents, commented on the current state of the market during an interview with the BBC’s Today programme. “The market is recovering. It certainly won’t be the best year we’ve ever seen, but each time we see a small interest rate drop, more buyers are returning from last year’s backlog.”

Karen Noye, a mortgage expert at Quilter, noted that some lenders are currently offering mortgage deals around the 4% mark, a significant improvement compared to the 5% rates or higher that were common following the 2022 mini-budget. “This reduction in rates has allowed buyers to secure larger mortgages, making previously unaffordable properties more attainable and boosting buyer confidence,” she explained.

Despite these encouraging signs, Noye cautioned that borrowing costs remain out of reach for many, particularly first-time buyers. As of Monday, the average rate for a two-year fixed-rate mortgage stood at 5.38%, while the average for a five-year fixed deal was slightly lower at 5.05%. Halifax acknowledged that while recent cuts in mortgage rates have provided some relief, “housing costs remain a challenge for many.”

The typical first-time buyer in the UK is now purchasing a property priced at £232,769, which is the highest price since May of this year. However, this figure still falls approximately £1,000 below the average price that first-time buyers were paying two years ago.

It is important to note that Halifax’s house price data is based on its own mortgage lending, which does not encompass cash buyers or buy-to-let transactions. Cash buyers make up about a third of all housing sales, indicating that the actual market dynamics may be even more complex than the data suggests.

For those seeking to make their mortgage more affordable, several strategies can be employed. Overpayments can be beneficial if you are still within a low fixed-rate deal, allowing you to pay more now to save later. Alternatively, moving to an interest-only mortgage can help keep monthly payments manageable, although it will not reduce the debt accrued when purchasing the property. Extending the life of your mortgage is another option; while the typical term is 25 years, many lenders now offer terms of 30 or even 40 years.

As the UK housing market continues to evolve, the combination of falling mortgage rates and improving affordability may pave the way for sustained growth. However, the challenges faced by many buyers, especially first-time homeowners, underscore the importance of careful financial planning and consideration of various mortgage options.