Housing market professionals are expecting house price growth to slow amid the recent rise in mortgage rates.
19 October 2022
The average UK house price reached a record high of £296,000 in August after jumping by £36,000 annually, according to official figures.
But experts commenting on the data said expectations have changed significantly in recent weeks amid mortgage rate rises, with the likelihood of a dampening effect on house price growth.
Annual house price growth slowed to 13.6%, easing from 16.0% in July, the Office for National Statistics (ONS) said.
It added that there had been volatility in house prices a year earlier due to stamp duty changes.
Average house prices in the UK increased by 1.1% between July and August this year.
ONS prices division deputy director, Matt Corder said: “House prices increased slightly on the month, with the fall in the annual rate of growth due to the large price rises seen at this time last year at the end of the stamp duty holiday.”
The average house price in Scotland increased by 9.7% over the year to August hitting a record level of £195,000.
In Wales, the typical house price also hit a record high of £220,000 after increasing by 14.6% over the year.
A record high was also hit in England, at £316,000, after house prices increased by 14.3% annually.
The average house price in Northern Ireland increased by 9.6% annually, reaching £169,000.
Within England, the south west had the highest annual house price growth in August at 17.0%.
The lowest annual house price growth was in London, where average prices increased by 8.3% over the year to August.
London’s average house prices remain the most expensive of any part of the UK, with a record average price of £553,000 being hit in August.
The north east continued to have the lowest average house price, at £164,000 in August, although this was also a record high for the region.
Stamp duty was cut in the recent mini-budget, however, mortgage rates have jumped in recent weeks amid the recent economic turmoil following the fiscal event.
According to figures from Moneyfacts.co.uk on Wednesday, the average two-year fixed-rate mortgage on the market has a rate of 6.52% and the average five-year fix is at 6.36%.
Bank of England base rate rises have also been pushing mortgage rates upwards. Back at the start of December last year, two and five year fixed mortgage rates averaged 2.34% and 2.64% respectively.
There are around 900 fewer mortgage products available than there were on the day of the mini-budget.
Chris Druce, senior research analyst at Knight Frank, said: “Current activity in the housing market is being shaped by mortgage status.
“Those that can are pushing on and securing deals ahead of further increases, while others have paused plans to digest events.
“With affordability set to be a growing barrier for many homebuyers in the coming months, we forecast house price growth will slow from here, with price falls in 2023.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “August’s figures reflect demand back in May, when we could see a few warning signs start to emerge, but not the giant flashing red lights bedecking the market right now.”
Anna Clare Harper of real estate investment platform, IMMO said: “A lot can happen in a few short weeks.”
She added: “Going forward, the pace of house price growth is likely to slow.”
Nicky Stevenson, managing director at estate agent group Fine & Country said: “Market expectations for interest rates have changed considerably in recent weeks and we expect this to have a more pronounced dampening effect on house price growth in the near term.”
Jonathan Hopper, chief executive of Garrington Property Finders, said: “Though they were collected just a few weeks ago, the ONS’s figures are from a different age and a different property market.
“The mood on the property frontline has changed almost beyond recognition in that time.”
Tomer Aboody, director of property lender MT Finance, said: “Even a 10% fall in prices, which some are predicting, would take us back to where we were a year ago.”
Jamie Durham, an economist at PwC UK, said inflation and rising interest rates “will affect whether people are able to buy, and if they are, how much they are willing to pay. As a result, over the coming months a decline in house prices appears quite likely.”
Jason Tebb, chief executive officer of property search website OnTheMarket.com, said: “Higher stock levels, combined with inflationary pressures, higher energy bills and rising mortgage rates all continue to have an impact.”
Nick Leeming, chairman of Jackson-Stops, said: “This will be a long-term adjustment to a new normal that will likely take time to settle in.
“Yet, we expect that the market will continue to remain most active at the top end, where cash purchases persist and are much less impacted by economic headwinds.”
Iain McKenzie, chief executive of the Guild of Property Professionals, said: “The average price of a house in the UK is now almost £300,000.
“This will make it more challenging for first-time buyers already struggling to get on the ladder because of rising interest rates and mortgage availability.”