UK sold house prices fall again amid mortgage rates uncertainty, ONS House Price Index shows

UK sold house prices suffered another fall in February, the latest Office for National Statistics (ONS) House Price Index has found.

According to Land Registry data analysed by the UK’s official statistics body, final sale prices fell 0.2% (£600) year-on-year to £281,000. However, they grew 0.4% month-on-month after the fall registered in January’s figures was revised sharply downwards from a 0.6% fall to a 1.3% drop.

February’s statistics are initial estimates and could yet go up or down. To see how prices have changed in your area, you should check out the ONS’s house prices tool, which also shows how rents are changing.

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The ONS said the biggest annual decrease was recorded in Wales, where prices fell 1.2% (£2,500) compared to February 2023. In England, the average final cost of a home slumped below £300,000 to £298,000 after a 1.1% (£3,000) fall. Scotland (+5.6% to £188,000) and Northern Ireland (+1.4% to £178,000) both saw growth.

It comes as the housing market remains sluggish in the face of a volatile period for mortgage rates. While inflation has gone down, uncertainty about when the Bank of England will start to cut interest rates is keeping mortgage pricing elevated.

What does ONS HPI tell us about UK sold house prices?

The ONS’s monthly analysis of Land Registry data usually lags behind other indices of housing market activity. For example, Rightmove can show us consumer sentiment as it was only a few weeks ago, whereas the ONS takes almost two months to give us initial estimates.

But the official statistics body’s reports provide the most authoritative picture of exactly what’s been happening to house prices in recent times. Its latest assessment shows us that, while UK house prices are lagging overall, there is a divergence of performance in different regions and housing categories.

For example, prices remain up year-on-year in northern areas. The North East saw the strongest growth of any UK region, with prices going up 2.9% against the year, and 3.2% month-on-month - albeit from the lowest average price point in the UK at £160,406.

Meanwhile, in southern England, price deflation continued. The West Midlands saw the biggest fall outside of London, dropping 2.9% against the year, and 1.2% month-on-month to an average price of £242,429.

As for London, prices were 4.8% down compared to February 2023, and 0.7% lower than in January. It’s average price of £502,690 was still almost £130,000 above the next most expensive region - the South East, where you can expect to pay just over £373,000 for a home (this figure was 2.1% down year-on-year, but 1.1% up on the month).

In terms of property types, the ONS figures suggested that the top end of the market was performing the strongest - something that was suggested by recent Rightmove research into the UK’s most expensive streets. Semi-detached homes saw prices grow 0.7% (almost £2,000) year-on-year to an average of £274,252, while detached properties saw a 0.5% (almost £2,000) boost to £435,398.

Terraced homes saw their value drop 1% (nearly £2,500) to £229,443 over the period, while flats and maisonettes saw typical prices fall by almost exactly the same amount to £227,188. The average cost of a first-time buyer home was 0.3% lower than a year ago, but 0.7% higher month-on-month at £234,654.

What’s happening to mortgage rates?

The latest ONS data has captured a period when the decline in mortgage rates began to slow - and even reverse - in the wake of worse-than-expected inflation data. With the rate of UK price rises proving to be stickier than expected, the Bank of England has kept its base rate frozen at a record high. It appears likely the next two months of ONS data will show subdued prices given this disruption has continued.

More recent HPIs from lenders suggest the issue continued into March, with Nationwide directly blaming mortgages for a worse-than-expected set of data, and Halifax showing a similar picture. With sturdy wage growth and the latest inflation data, analysts are now warning that we should expect rates to remain higher for longer.

Nicholas Mendes, mortgage technical manager at broker John Charcol, said: Mortgage holders coming to the end of their fixed deals this year and in early 2025 will need to be prepared to see higher rates than early predictions. Initial forecasts of a 3.5% fixed rate by August to late September are very unlikely, with any sign of such a deal now pushed back to later in the year.

“While the temptation will be to wait and hold out for the best deal, it is strongly recommended that you speak with a broker so you can regularly understand the options available to you until your deal is due to expire.”

According to Moneyfacts Compare, the typical rate for a two-year fix last week was 5.8%, with a five-year fix coming in at 5.39%. These rates are lower than the peak seen in 2023, but remain well-above the levels seen in the late-2010s.