Halifax: UK house prices ‘plateauing’ due to rising mortgage rates

There has been no spring bounce for UK house prices, the latest Halifax House Price Index (HPI) finds.

Property price inflation remained relatively static in April, with average prices rising just 0.1% (£168) month-on-month. On an annual basis, prices were up 1.1% but the lender put this down to the weak housing market performance it recorded in April 2023.

Halifax blamed the lack of growth on what’s happening to mortgage rates. With interest rates frozen at a 16-year high, lenders - including Halifax – have been increasing their rates on short-term fixed deals. We will find out the next Bank of England interest rate decision later this week.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

These findings are similar to those of the Nationwide HPI, which also blamed expensive mortgages for the stagnation in the housing market. Against this challenging backdrop, Halifax has found buyers are opting for smaller homes in a bid to make up for affordability constraints.

UK house prices continue to see North-South divide, Halifax finds

According to Halifax’s latest analysis of the UK housing market, the average home cost £288,949 in April - up £168 compared to March and just £1,700 (0.6%) higher than at the start of 2024. Year-on-year, house prices are more than £3,000 more expensive.

The biggest growth was registered in Northern Ireland, where prices went up 3.4% on average to £192,502. However, Halifax pointed out that this was a slowdown on the previous month’s growth rate of 4.1%.

In England, the North-South divide registered by other HPIs continued to be a factor in Halifax’s data. The North West registered the highest rate of annual price inflation, growing 3.3% to £231,599. At the other end of the scale, homes in Eastern England posted a 1.1% price drop compared to April 2023. This £3,500 fall meant the average property cost £329,723 in April.

Prices in London continued to be relatively flat, growing just 0.1% annually to an average of £539,336. Scotland (+1.5% to £204,579) and Wales (+1.1% to £218,775) also recorded low-level growth.

Halifax: ‘House prices have plateaued since new year’

Amanda Bryden, head of mortgages at Halifax, said the findings demonstrated that record interest rates are a “significant challenge” for the housing market. She said: “While there is always much scrutiny of monthly price changes – and a degree of volatility is to be expected given current market conditions – the reality is that average house prices have largely plateaued in the early part of 2024.

“This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability. Activity and demand is improving, evidenced by greater numbers of mortgage applications so far this year, while at an industry level mortgage approvals have reached their highest point in 18 months.”

Bryden added that mortgage products “should fall” in price later this year, when the Bank of England is expected to cut interest rates. As such, she said Halifax now expects house prices to “rise modestly” over the remainder of 2024.

This positive future outlook was echoed by Karen Noye, mortgage expert at Quilter, who said: “We could see a turning point for the property market as we approach the summer months. An interest rate cut would present a more favourable borrowing market and would likely help reignite demand given many people are holding off in hopes of lower rates and reduced affordability pressures.”

However, in the nearer-term, she added that Quilter expects “transactions to remain dampened for some time yet” as a result of mortgage rate increases over the last few weeks. She said: “When combined with the ongoing cost of living pressures, many prospective buyers will struggle when it comes to affordability, particularly those first-time buyers who will also have found it much harder to save enough for a deposit.”

At present, the market consensus is that the interest rate cutting cycle will begin in August. However, some are still predicting a cut at the June meeting, while the more pessimistic predictions don’t have a cut pencilled in until as late as November.

According to estate agency Chestertons, there is some hope for sellers in London. Its head of sales Matt Thompson argued the usual spring bounce had been “slightly delayed” rather than non-existent. He said: “Compared to March, we saw an increase in the number of London house hunters which also led to sellers feeling more confident about putting their property up for sale. Still, demand continued to outweigh supply in April which gave the majority of sellers the upper hand during price negotiations.”