Housing costs have risen. In July, the average house price was £291,268, noted Halifax, a leading UK mortgage provider. This represents a 0.8% increase from June; this was equal to the cost of over £2,200 for the average property. The increase outstripped the expectations of economists by going up to 0.3% rise.
In the same year, there was a rise in house prices by 2.3%. This growth is positive. It comes after the Bank of England’s decision on August 2 to cut interest rates for the first time in over four years. The cut to 5% at the quarter-point came after the period reported by Halifax in its latest update.
Amanda Bryden, director of mortgages at Halifax, noted that the latest rate cut and falling mortgage rates benefit those looking to remortgage, buy a first home, or move up the property ladder. But she also noted bottlenecks. These include high house prices and a lack of homes for sale.
Bryden expects small growth in house prices for the rest of the year. This is due to falling mortgage costs and a chance of lower Base Rates.
The North West saw growth, with prices up 4.1% from June to July. The average property price is now £232,489. London is still the priciest region. The average home costs £536,052.
Ashley Webb, an economist at Capital Economics, has a view. He believes rising prices indicate a recovery in house prices. This follows a small hike in mortgage rates earlier this year. He believes the Bank of England may not cut rates until November. But, it could act sooner. If so, house prices could rise faster than expected.
Sam Mitchell, CEO of online estate agents Purplebricks, agreed. He noted that the recent interest rate cut has boosted confidence in the housing market. He added that, as lenders cut mortgage rates, buyers are resuming delayed purchases. This is in response to the Bank of England’s decision.
This rate cut is the first since the outbreak of COVID-19 in March 2020 up to now. Nonetheless, existing rates are much above those registering between 2008 and 2021, where rates never went past 0. 20-75%, and were as low as 0. 1% until late 2021. With the mortgage rates also following the interest rates up, homeowners have been presented with considerably higher payments, 1. 6 million mortgagors are predicted to face an average of £1,800 uplift each year which was revealed by the Resolution Foundation.
Carsten Jung, senior economist at the independent policy institute, IPPR said it was correct for the Bank of England to cut its interest rates but this was timely. They told him that the extra year at high interest rates has knocked out the recovery in the UK which still languishes at 6% off its pre Covid trend, lagging way behind the United States and the eurozone. As consumers’ inflation expectations normalised and the labour market eased, Jung called on the Bank to guide the market that more rate cuts were to be expected in the forthcoming months.