The housing market could benefit from house prices and interest rates remaining flat, Halifax claims.
Its latest House Price Index (HPI) showed UK prices fell marginally month-on-month to an average of £288,688. With interest rates remaining frozen at a 16-year-high of 5.25% and mortgage rates plateauing after months of increases, the lender said buyers and sellers should have a “degree of confidence.”
Other house price indices have shown a spring bounce has taken place, with Nationwide and the Office for National Statistics both reporting uplifts in property prices. Rightmove found asking prices hit a record high last month.
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It comes as experts have predicted that the market will be relatively unaffected by the general election campaign. But changes could be on the way after the Labour Party said it would introduce a Freedom to Buy scheme if it forms the next government. The Conservatives have promised not to hike stamp duty if they are re-elected at the ballot box.
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Halifax: UK house prices ‘have not seen a spring bounce’
The latest property research from Halifax has shown the average UK house price fell 0.1% (£174) from £288,862 in April to £288,688 in May. It means the UK average has remained relatively static for a third consecutive month.
Year-on-year, prices rose 1.5% - an acceleration of price inflation on April’s data, which showed growth of 1.1%. But this jump came as a consequence of house prices dropping almost 2% in May 2023.
The highest growth figures were seen in the North West, where prices rose 3.8% annually to an average of £232,258. Northern Ireland was not far behind, posting an annual increase of 3.2% - a slight drop on the 3.3% yearly growth it recorded in April.
Scotland’s housing market also experienced above-average inflation, Halifax found, with a rate of 1.9%. But Wales saw its rate of growth slide from 1.1% the previous month to 0.7%, meaning house prices in the nation are now £219,483.
The biggest decline was seen in Eastern England, where prices fell 0.8% year-on-year to an average of £329,853. Meanwhile, London remained relatively static, with prices going up just 0.2% annually to a still-expensive price tag of £536,821.
House prices unlikely to change significantly anytime soon, Halifax says
Reacting to the latest figures, Amanda Bryden, the head of mortgages at Halifax, says: “Market activity remained resilient throughout the spring months, supported by strong nominal wage growth and some evidence of an improvement in confidence about the economic outlook. This has been reflected in a broadly stable picture in terms of property price movements, with the average cost of a property little changed over the last three months.
“A period of relative stability in both house prices and interest rates should give a degree of confidence to both buyers and sellers. While homebuyers and those remortgaging will continue to respond to changes in borrowing costs, set against a backdrop of a limited supply of available properties, the market is unlikely to see huge fluctuations in the near term.”
Capital Economics, which said the economic consensus was that house prices on Halifax’s HPI would rise 0.2% month-on-month, warned mortgage rate rises have “a little further to go” as a result of a delay in interest rate cuts caused by the election. It added: “[This has] fed through to a rise in the interest swap rates that mortgages are priced off. As a result, in the near term, house prices will stagnate at best.”
According to comparison website Moneyfacts, the average two-year fixed mortgage deal was 5.95%, while a typical five-year fix stood at 5.52% - 0.01 percentage points up on the day before. There were 6,656 products available to buyers and remortgagers.
In the longer term, Capital Economics said falling inflation and future base rate reductions could reduce mortgages to the extent that there is a “renewed impetus” in prices in 2025. The consultancy said we could see growth of 5% next year.
This outlook was echoed by Nicky Stevenson, managing director of estate agency group Fine & Country, who said: “With inflation easing, there should soon be more confidence in household budgets, allowing buyers to aim higher for their desired home. Recent transaction figures also revealed a fourth consecutive month-on-month increase in April, with more people seeing sales through to completion.
“For sellers, increased demand for homes means they can hold firm on their asking prices. While this might not be welcome news for buyers - especially first-timers - an anticipated interest rate cut this summer could provide some relief in the coming months.”
Professional body Propertymark was also positive. Its chief executive Nathan Emerson said the UK market “seems to be generally moving in the right direction”. But he also warned: “With a general election now on the horizon, there may be potential caution from buyers and sellers, especially those hoping to step onto the housing ladder for the first time, as they await any announcements regarding government support. People will also be carefully awaiting the Bank of England’s next announcement this month.”
