Is the housing market already starting to slow? Average property price drops for the second time in three months from record high as mortgage rates soar past 6 per cent
- Halifax index shows average house price edged down in September, from a record high the previous month
- Its report says figures indicate market may have already entered a more sustained period of slower growth
- House prices fell back slightly by 0.1% in September while annual rate of price growth also slowed to 9.9%
The average house price edged down in September from a record high the previous month, according to an index released today which also suggests the property market may already be set into a period of slower growth.
Across the UK, house prices fell back slightly by 0.1 per cent in September, according to the figures from Halifax. The annual rate of house price growth also slowed to 9.9 per cent in September from 11.4 per cent in August.
This also means the annual rate of growth has now returned to single digits for the first time since January. A typical UK property now costs £293,835, according to Halifax’s index. The record figure in August was £294,260.
Halifax also said figures going back to the summer indicate the housing market may have already entered a more sustained period of slower growth. The fall in September was the second slight fall over the past three months.
The number of mortgage products available fell sharply following the recent mini-budget last month – and as product choice has gradually returned, lenders have been pricing their mortgage deals upwards.
It is part of the fallout from Chancellor Kwasi Kwarteng’s announcement on September 23, which sparked fresh uncertainty in the UK economy by announcing a series of tax cuts – some of which have since been reversed.
The average five-year fixed-rate mortgage and the average two-year fix breached 6 per cent this week – the first time this has happened in more than a decade – according to data from Moneyfacts.co.uk.
Kim Kinnaird, director of Halifax Mortgages, said: ‘The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250.
Average UK house prices in September by region
Here are average house prices in September and the annual increase, according to Halifax:
- East Midlands, £245,082, 11.7%
- Eastern England, £340,839, 9.7%
- London, £553,849, 8.1%
- North East, £170,999, 9.9%
- North West, £229,106, 12.8%
- Northern Ireland, £184,570, 10.9%
- Scotland, £204,305, 8.5%
- South East, £399,895, 10.6%
- South West, £311,229, 12.5%
- Wales, £224,490, 14.8%
- West Midlands, £255,822, 13.3%
- Yorkshire and the Humber, £208,318, 11.4%
‘This compares to a rise of more than £10,000 during the previous quarter, suggesting the housing market may have already entered a more sustained period of slower growth.
‘Predicting what happens next means making sense of the many variables now at play and the housing market has consistently defied expectations in recent times.
‘While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, the prospect of interest rates continuing to rise sharply amid the cost-of-living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.
‘This will undoubtedly be a cause of some concern for homeowners but the unprecedented rate of property price inflation we’ve seen in recent years has been far above the historic average.
‘It’s important to look at slower growth in this context – since the start of the pandemic average property values have risen by around 23 per cent (nearly £55,000) with detached house prices up by more than £100,000 over the same period.’
Looking across the UK, annual house price growth is strongest in Wales, at 14.8 per cent.
Meanwhile, Scotland, London, Eastern England and the North East of England have seen annual house price inflation fall to single-digit levels.
The West Midlands has overtaken the South West to record the strongest rate of annual growth in England, with house prices rising by 13.3 per cent over the past year.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: ‘It’s a fairly safe bet that UK house prices have now peaked.
‘The impact of rising mortgage rates will begin to hit demand and spending power in coming months, which we believe will lead to a fall of 10 per cent over the next two years for UK prices.’
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, have been urged to act but not to panic, writes This is Money editor Simon Lambert.
Banks and building societies are still lending and mortgages are still on offer with applications being accepted.
Rates are changing rapidly, however, and there is no guarantee that deals will last and not be replaced with mortgages charging higher rates.
This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value
What if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.
Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to higher mortgage rates limiting people’s borrowing ability.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.
This is Money’s mortgage broker partner L&C told me that mortgages are still available and you can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check the best fixed rate mortgages you could apply for
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘While the turmoil of the past couple of weeks will go down in the history books, the money markets seem to have settled a little.
‘It is important to reiterate that the mortgage market is still open for business.’
Alice Haine, a personal finance analyst at Bestinvest, said: ‘While the pace of mortgage rate rises has accelerated since the mini-budget, the situation is not a complete surprise.
‘Mortgage costs have been increasing steadily since December when the Bank of England first started pushing up its base rate from a record low of 0.1 per cent in a bid to curb runaway inflation.
‘The base rate now sits at 2.25 per cent, with expectations it might jump up to 1 per cent at the Monetary Policy Committee meeting next month, pushing up mortgage rates once again.’
Matthew Thompson, head of sales at Chestertons, said the estate agent is ‘encountering an increasing number of house hunters who want to secure a property as soon as possible and take out a fixed-rate mortgage’.
He added: ‘This has contributed to September’s property market remaining busy and competitive. As the cost-of-living crisis is looming, some buyers are compromising on their priorities in order to secure a property under their initial budget.’
Yesterday, it emerged that the average five-year fixed-rate mortgage on the market has breached 6 per cent for the first time in 12 years.
Across all deposit sizes, two-year and five-year fixed rates now both stand at more than 6 per cent on average, according to Moneyfacts.co.uk.
The typical five-year fixed-rate mortgage yesterday was 6.02 per cent, Moneyfacts said, having crept up from 5.97 per cent on Wednesday.
The last time average five-year fixed-rate mortgages were at 6 per cent was in February 2010, when the rate was 6.00 per cent.
The average two-year fixed-rate mortgage stands at 6.11 per cent, having breached the 6 per cent mark on Wednesday, for the first time since November 2008.
Moneyfacts calculated the potential impact that rising rates could have for someone with a £200,000 mortgage, paying it back over 25 years.
Back in December 2021, the average two-year fixed mortgage on the market had a rate of 2.34 per cent.
Someone with a £200,000 mortgage taking out a two-year deal at that time could have had monthly repayments of £881.20.
But on current average rates, their monthly mortgage repayments could be £1,302.08 – a difference of around £420 per month, or more than £5,000 per year.
Looking at someone in the same circumstances taking out a five-year fixed-rate mortgage, the average rate back in December 2021 was 2.64 per cent.
This could have meant monthly payments of £911.40 for someone with a £200,000 mortgage taking out a deal at that time.
But now, someone could typically expect to be paying £1,291.05 per month if they took out a five-year deal now – a jump of just under £380 per month, or more than £4,500 per year.
A string of rises in the Bank of England base rate in recent months have pushed up borrowing costs generally, while volatile market conditions following the mini-budget prompted lenders to pull mortgage deals from sale and increase their rates.
Swap rates, which lenders use to price their mortgages, have been increasing recently.
Having shrunk severely last week, the choice of mortgage products has been gradually increasing as lenders introduce new deals, according to Moneyfacts’ figures.
Some 2,430 mortgage deals were available yesterday, which is up from 2,258 on Sunday, at the start of the week. However, mortgage choice is still well down compared with the 3,961 products available on the day of the mini-budget.
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