The UK housing market maintains its momentum with a fourth consecutive surge in house prices observed in January. Insights from Halifax, a leading mortgage lender, shed light on this trend, offering valuable data and analysis.
Halifax Reports Record Surge in UK House Prices Amidst Market Resurgence
According to data from Halifax, the median house price in the UK experienced a notable surge of 1.3% in the previous month, reaching £291,029.
This substantial increase contributed to a national yearly growth level of 2.5%, marking the highest rate observed in the past year. However, the London market saw a contrasting trend, with an annual drop of 0.4% to an average price of £529,528.
Recent data reveals a notable increase in buyer activity at the onset of the new year, attributed to a series of rate cuts initiated by banks and building societies. This resurgence in buyer interest is now translating into tangible effects on housing prices.
Despite predictions of a property market crash following interest rate hikes by the Bank of England to combat inflation, the anticipated downturn did not materialize as expected. Contrary to projections, the market experienced resilience in the face of these challenges.
Stephen Perkins, Managing Director at Yellow Brick Mortgages, likened the property market's resurgence in 2024 to a rebound on a trampoline, emphasizing the significant increase in activity levels observed in January. Perkins attributed this rebound to growing confidence in mortgage rates, dismissing earlier predictions of a house price crash as increasingly improbable.
The January surge coincided with a wave of aggressive mortgage rate cuts by lenders, triggering what has been described as a 'price war' amidst expectations of further base rate cuts by the Bank of England.
While some mortgage products with sub-4% interest rates were reintroduced, their accessibility remained limited to buyers with substantial deposits. Additionally, the median five-year fixed-rate mortgage dropped below 5.2% during the month.
Halifax mortgage director Kim Kinnaird stated: “The average house price in January was £291,029, up +1.3% or, in cash terms, £3,924 compared to December 2023.
“This is the fourth consecutive month that house prices have risen and, as a result, the pace of annual growth is now +2.5%, the highest rate since January last year.
Mortgage Rate Dip Sparks Confidence Amid Affordability Worries in the UK Housing Market
The recent decline in mortgage rates, propelled by intensified competition among lenders, coupled with easing inflationary pressures and a resilient labour market, has instilled confidence within both buyers and sellers in the UK housing market. This newfound optimism has heralded a promising beginning to 2024.
However, despite the recent surge in housing activity, interest rates persist at relatively high levels compared to the historic lows witnessed in previous years, perpetuating a scenario where demand consistently outpaces supply.
First-time buyers now confront an average deposit requirement of £53,414, representing approximately 19% of the purchase price. Notably, a significant proportion—nearly two-thirds (63%)—of new buyers are opting for joint purchases to navigate these daunting affordability hurdles.
Looking ahead, concerns surrounding affordability are anticipated to persist, with the possibility of further modest declines in prices looming large, particularly amidst the broader economic uncertainties on the horizon.
Matt Thompson, head of sales at Chestertons, emphasized: “The gradual introduction of more attractive mortgage products boosted buyer confidence in January, resulting in more buyers entering the market. This increase in activity was further driven by pent-up demand from house hunters who were unable to find a property last year. Sellers also feel more confident about attracting the right buyer for their home, which led to a slight increase in the number of properties being put up for sale in January.”
In recent developments, mortgage prices have shown signs of resurgence, with the Bank of England hinting at a potentially less aggressive approach to rate cuts than initially anticipated.