UK house prices are approaching their 2022 peak after rising for the third consecutive month during September but growth is likely to remain modest for the rest of the year, according to Halifax.
The latest Halifax House Price Index shows average UK house prices rose 0.3% on a monthly basis in September, the same level as a month before.
Average prices were also up 4.7% annually, marking the fastest rate of house price growth since November 2022.
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It puts the average UK house price at £293,399, just shy of the record high of £293,507 set in June 2022.
The housing market has been helped by falling mortgage rates following the Bank of England’s rate cut in August, boosting demand to buy property.
But mortgage costs remain relatively high and the Autumn Budget may dampen demand from the end of October due to expected tax rises.
Amanda Bryden, head of mortgages at Halifax, said it is essential to view these recent gains in context.
“While the typical property value has risen by around £13,000 over the past year, this increase is largely a recovery of the ground lost over the previous 12 months,” she says.
“Looking back two years, prices have increased by just 0.4%.
“Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40% in the last year and now at their highest level since July 2022.
“While improved mortgage affordability should continue to support buyer activity – boosted by anticipated further cuts to interest rates – housing costs remain a challenge for many. As a result, we expect property price growth over the rest of this year and into next to remain modest.”
A strong September for house prices
There are of course regional differences when it comes to house price growth.
Northern Ireland continues to record the strongest property price growth of any nation or region in the UK, according to Halifax.
The North West of England once again recorded the strongest house price growth of any region in England, up 5.1% annually to £234,355.
London continues to have the most expensive property prices in the UK, now averaging £539,238, up 2.6% compared with last year. This is still some way below the capital’s peak property price of £552,592 set in August 2022, according to Halifax.
Is now a good time to buy a property?
With house price growth at a two-year high, some may feel they have missed the boat to buy a property.
House price growth slowed earlier this year amid sticky inflation and high mortgage rates, which hit buyer purchasing power.
Inflation has slowed in recent months and mortgage rates have been coming down, especially after the Bank of England cut interest rates in August.
This has helped boost buyer demand. But more demand ultimately has made sellers more confident of the price they can get for their property, pushing prices up.
The average amount paid by first-time buyers has increased by 4.2% over the past year, which equates to an extra £9,409 in cash terms, according to Halifax.
This brings the typical first-time buyer property price up to £232,769, its highest level since May 2024.
However, that’s still around £1,000 less than the average amount paid by a first-time buyer two years ago, a decrease of around 0.4%.
Sarah Coles, head of personal finance at Hargreaves Lansdown, suggested the market is still likely to struggle amid high house prices, especially as mortgage rates are higher than many are used to.
The Autumn Budget is also expected to dampen demand due to expectations of tax rises and could boost supply if more landlords exit due to further rental regulations.
“The fact that wages are outstripping house prices will help, but for an awful lot of buyers – including newcomers – it’s going to stretch affordability to breaking point,” says Coles.
“The market is also likely to be increasingly held back by a flood of active sellers too. Zoopla figures have shown that fears over potential capital gains tax rises in the Budget have persuaded more people to put rental and holiday homes on the market. It found that the number of properties up for sale has risen 12%, and that 13% of them were previously rented out.
“Coastal and rural homes were also hastily put up for sale, which is where so many holiday homes are based. It means that despite booming buyer demand, it will hold house price rises back eventually."
Estate agents, perhaps unsurprisingly, are adopting a more optimistic tone.
“The last two years have underlined the close relationship between mortgage rates and house prices – as one goes up the other goes down," says Tom Bill, head of UK residential research for Knight Frank.
“We expect low single-digit price growth this year as rates continue to drift lower, with the Budget the main cause of uncertainty on the horizon. If it's better than feared, there is likely to be a relief bounce in activity before Christmas that lasts into next spring.”
Guy Gittins, chief executive of London agent Foxtons, added: "After the shock interest rates rises in 2022, the market saw a very difficult 2023 and since the interest rates have now started to trickle down, we have certainly seen buyer confidence returning to the market, with new buyer numbers being well up along with viewings.
"Currently at Foxtons our pipeline of agreed sales is sitting at the highest level since before the referendum in 2016. So certainly, very positive news and quite a positive outlook for what may lie ahead, assuming we might see another rate drop.”
