The latest analysis from one of the UK’s largest mortgage lenders shows that the housing market is slowly recovering, with a slight increase in prices. According to Halifax’s house price index, average house prices rose by 0.1% in April, following a 0.9% decrease in March. On an annual basis, prices grew by 1.1%, up from 0.4% growth the previous month.
Despite these positive signs, the average house price in the UK remains relatively stable at £288,949 in April, only slightly up from £288,781 in March. Amanda Bryden, Head of Mortgages at Halifax, believes that this plateauing of prices reflects the market’s adjustment to higher interest rates.
“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,” stated Bryden.
The Bank of England’s rate-setters are expected to keep interest rates at 5.25% when they meet on Thursday, in an effort to bring inflation down. This has resulted in more expensive borrowing costs, leading to a rise in demand for flats and smaller homes.
“We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years,” explained Bryden.
While there were expectations for an interest rate cut in May, it is now speculated that this may not happen until August. The high interest rates have also kept average mortgage rates elevated, which has helped to keep property prices from rising too quickly.
Despite these factors, Halifax is still forecasting a modest increase in house prices for the rest of the year. “If, as is still expected, downward moves in Bank rate come into play later this year, fixed mortgage rates should fall. Combined with the resilience displayed by the housing market over recent months, we now expect property prices to rise modestly over the course of 2024,” stated Bryden.
