House prices hit record high, says Halifax

House prices have reached a record high, according to Halifax, with the average property now costing £293,999.

This is higher than the previous peak set in June 2022 (£293,507), towards the end of the pandemic-era “race for space”.

The UK’s largest mortgage lender said house prices rose 0.2% last month (October) - a fourth consecutive monthly increase - and had increased by 3.9% over the past year.

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It follows official data from the Land Registry that property prices jumped by 1.5% in August, bringing the annual growth rate to 2.8%.

Amanda Bryden, head of mortgages at Halifax, says that news that prices had hit a record high would be a surprise to many people, given the economic climate.

“Despite the affordability challenge, market activity has been improving. The number of new mortgages agreed recently reached its highest level in two years. This aligns with average mortgage rates dropping steadily since spring - now over 160 basis points lower than in summer 2023 – coupled with continued positive income growth,” comments Bryden.

But will the upward trend in house prices continue into 2025? The estate agent Savills is bullish and predicts that prices will rise 23.4% by 2029 as a result of lower mortgage rates.

However, Zoopla cautions that a change in stamp duty thresholds next year could dampen growth.

Which regions are seeing the strongest house price growth?

Northern Ireland continues to record the strongest annual house price growth in the UK, rising by 10.2% on an annual basis in October. The average price of a property in Northern Ireland is now £204,242, according to Halifax.

House prices in Wales also saw strong growth, up 5.6%, compared to the previous year, with homes now costing an average of £225,543.

Scotland saw a more modest rise in house prices, where a typical property now costs £206,480, which is 1.9% more than the year before.

The North West remains the region of England with the strongest growth, up by 5.9% over the last year, to sit at £235,587.

Meanwhile, London continues to have the most expensive property prices in the UK, now averaging £543,308, up 3.5% compared to last year.

Will the house price rally continue?

Lower mortgage rates should help boost the property market, but a return to lower stamp duty thresholds could be a headwind.

While mortgage rates have increased since the Autumn Budget, today’s cut in the Bank rate from 5% to 4.75%, and expectations that interest rates wil drift lower next year should cause mortgage costs to fall.

The consultancy Capital Economics predicts that interest rates will eventually be cut to below 4%, and annual house price growth will accelerate from around 3% in Q4 2024 to 5.0% in Q4 2025.

In terms of stamp duty, the tax-free thresholds were temporarily lowered in 2022, but this relief will come to an end in April next year. The threshold will revert from £250,000 to £125,000 (and from £425,000 to £300,000 for first-time buyers).

Guy Gittins, CEO of Foxtons, says that while homebuyers were disappointed about the lack of a stamp duty relief extension in last week’s Budget, “the vast majority have already factored this increased cost into their plans for 2025 and those currently looking to purchase still have time to complete before the deadline at the end of March next year”.

He adds: “As a result, we can expect the heightened level of market activity seen this year to continue, with momentum strengthening as we head into 2025.”

Bryden is more cautious, pointing to forecasts that the Bank of England is expected to cut rates more slowly than previously anticipated, and warning that new policies like higher stamp duty for second home buyers and a return to previous thresholds for first-time buyers could also affect demand.

She notes: “While we expect house prices to keep growing, it will likely be at a modest pace for the rest of this year and into next.”