UK house prices rose 12.6% in October says the ONS

According to most metrics, UK house prices are starting to fall.

However, the latest house price data from HM Land Registry (HMLR) seems to suggest the opposite.

According to its figures, average house prices in the UK increased 12.6% in the year to October 2022 – up from 9.9% in the year to September.

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This takes the average UK house price to £290,000 in October 2022, £33,000 higher than this time last year.

These figures contrast sharply with the numbers published by the online property portal Rightmove earlier in the week. Rightmove’s data showed UK house prices had actually seen their biggest December dip in four years in November.

In addition, Halifax’s house price index claimed UK house prices had seen their biggest drop in prices since 2008 in October. Nationwide’s house price index, released 1 December, concurred – UK house prices fell at their fastest pace since 2020 in November.

So, why was the data from HMLR different?

HMLR’s house price growth was driven by changes to stamp duty

“The 12.6% jump in house prices over the year to October 2022 does not mean the property market is heating up again,” says Myron Jobson, senior personal finance analyst at interactive investor.

“Instead, it lays bare the distortions caused by the stamp duty holiday – which ended in October 2021 and artificially depressed sales in the months after.”

The stamp duty holiday was introduced by then-chancellor Rishi Sunak in July 2020 to provide a boost to the economy in the face of the pandemic. It ended on 30 September 2021.

The mortgage marketplace was severely affected by the mini-Budget in September after borrowing prices increased exponentially, and more up-to-date house price indexes reveal this.

Mortgage rates peaked at 6.65% in the aftermath of the mini-budget. They have since climbed back down to 5.99% and 5.78% for two-year and five-year fixed mortgage rates respectively, but remain significantly higher than they were this time last year when buyers could find rates at around 2%.

“It takes months before sales are completed and many of the mortgages for house purchases in October were likely agreed well before the mortgage market chaos following the infamous fiscal event,” says Jobson.

“Other more up-to-date house price indices paint a picture of a runaway housing market that is running out of steam as affordability pressures from high inflation, a fall in real wages and the rise in mortgage rates bite.”

Given the state of the mortgage market, the rising cost of living and the bleak economic landscape buyers are likely to stop and think about whether now is a good time to buy a house.

It’s unclear whether the current stamp duty holiday, which was extended by Jeremy Hunt but is due to end in 2025, will boost demand given all the other economic headwinds.

UK Finance expects overall mortgage lending to fall 15% in 2023, returning to pre-pandemic levels. Lending for house purchase mortgages is expected to fall 23% due to cost-of-living pressures and rising interest rates effect on affordability. More broadly, property transactions are expected to fall 21% by next year.

“For many buyers, rather than stretching their finances too much now to buy, it might be more prudent to wait until they are a bit more comfortable financially,” says Jobson. “But there are no guarantees – the affordability squeeze could become more acute before easing, and personal circumstances might require you to buy a home.”