UK House Price Growth Maintains Momentum at 2.2%

UK house prices rise by £6,000 in a year, reflecting a steady 2.2% growth. Discover the latest insights on the UK Housing Price Index.

In the latest revelations from the UK housing market, house prices have experienced a modest uptick of 2.2% in the year leading up to July, marking the fifth consecutive annual increase. However, this figure represents a slight decline from the 2.7% surge recorded in June, as per the most recent UK House Price Index released by the Land Registry. The average house price across the UK now stands at £290,000, reflecting an increase of £6,000 compared to the same period last year.

UK House Price Growth Maintains Momentum at 2.2 percent

A closer examination reveals that the average house prices have risen by 1.6% in England, 2.0% in Wales, a striking 6.0% in Scotland, and an impressive 6.4% in Northern Ireland. Among the English regions, the North East has emerged as the frontrunner in annual house price inflation, boasting a 3.8% increase over the past year. Conversely, London has found itself at the opposite end of the spectrum, experiencing a slight decline of 0.4% in annual inflation.

On a monthly scale, the pace of growth in average UK house prices has decelerated between June and July, with a mere 0.6% increase compared to a more robust 1.1% during the same timeframe last year. Notably, when adjusted for seasonal fluctuations, average house prices actually dipped by 0.4% from June to July 2024.

Current trends indicate a burgeoning momentum within the UK housing market, spurred by the first base rate cut in four years, which has ignited a flurry of activity and competition among lenders. This shift has rekindled the interest of prospective buyers who may have previously postponed their plans. Rightmove reports a notable 19% increase in the number of potential buyers reaching out to estate agents compared to the previous year. The decline in mortgage rates has undoubtedly played a pivotal role in this resurgence, and while another base rate cut this week appears improbable, market expectations suggest a further reduction may be on the horizon before year-end, heralding more favorable conditions for potential buyers.

Data from Moneyfacts reveals that average interest rates for both two- and five-year fixed mortgages have decreased for two consecutive months, a trend that borrowers are keen to see persist. As September approaches, it also marks the two-year anniversary of the infamous mini-Budget, serving as a stark reminder of the profound influence that political decisions can exert on mortgage rates and the broader housing landscape. With the Budget scheduled for next month, one can only hope that the new Government is contemplating strategies to positively influence the prospects for homebuyers and homeowners alike, particularly those embarking on their first home-buying journey. After all, the housing ladder can only function effectively if individuals can successfully ascend that initial rung.

Interestingly, the anticipated autumn surge in market activity seems to have arrived ahead of schedule, as evidenced by today’s data indicating an upward trajectory in house prices. Thanks to the declining mortgage rates, both buyers and sellers are becoming increasingly proactive, thereby enhancing demand and gradually propelling house prices upward. Should interest rates be further reduced in the coming months, we can expect to witness additional gains in the market, thereby maintaining a positive trajectory for house prices.

However, it is imperative to acknowledge that several challenges loom on the horizon that could potentially dampen demand. With energy costs projected to spike by 10% next month and the impending October Budget hinting at possible tax increases, consumers may find themselves hitting the pause button to reassess their purchasing strategies. Landlords, in particular, may be dissuaded from expanding their portfolios, given the anticipated rise in capital gains tax.

With inflation remaining stubbornly at 2.2% and expected to inch upward in the autumn, it appears unlikely that this will prompt an additional rate cut from the Bank of England this month. Nevertheless, market analysts continue to anticipate at least one further rate reduction before the year concludes. On a brighter note for borrowers, mortgage rates are continuing to soften, with Santander recently introducing a sub-4% two-year fixed rate, buoyed by the lowest two-year Swap rates witnessed in two years. Additionally, a plethora of five-year fixed rates are available at sub-4% for those seeking stability over a more extended period.

While the era of rock-bottom rates may be a thing of the past, these recent reductions are providing borrowers with a semblance of comfort following a protracted period of escalating rates. The competitive landscape among lenders is likely to yield further gentle reductions in mortgage rates as they vie for new business, ensuring that the UK housing market remains a dynamic and evolving entity.