The UK’s largest mortgage lender, Halifax, has confirmed that the most significant challenge facing homebuyers and those nearing the end of fixed-term deals is the high cost of mortgages. However, the lender’s head of mortgages, Amanda Bryden, has said that the seemingly endless squeeze brought on by high interest rates is likely to be eased gradually as house price growth remains subdued while incomes rise.
According to Halifax’s latest figures, the average UK house price saw little movement in June, slipping by just 0.2% from the previous month. The average house price was £288,455, down slightly from £288,931 in May. Meanwhile, house prices were up 1.6% from a year earlier, echoing recent statistics from the Nationwide building society.
However, Ms Bryden has said that the market is “delicately balanced” and sensitive to how fast any changes to the Bank of England’s base rate are made. Although the Bank began raising its key interest rate in late 2021 to counter rising inflation, it recently indicated, during its latest rate-setting meeting, that it may cut its rates again at its next meeting on 1 August. Currently, the Bank’s base rate is at 5.25%, the highest level in 16 years.
Despite this, many homeowners are now facing much higher mortgage rates than they are used to should they come to the end of their fixed-rate deals. Recently, the Bank announced that around three million households are expected to see their mortgage payments rise in the next two years. The current average rate stands at 5.93%, which is lower than last year’s peak of 6.86%, and major lenders have also been lowering their rates in recent days.
In its latest figures, Halifax stated that Northern Ireland experienced the quickest regional house price growth, up 4% from a year earlier. London still has the most expensive average property price standing at £536,306.
Hargreaves Lansdown’s head of personal finance, Sarah Coles, has said that house prices and sales have been “tepid” for most of the year and unlikely “to warm up any time soon.” The market has been under pressure due to a combination of high mortgage rates and “sky-high” house prices as demand supersedes supply. Coles believes that the property market is going to be at the top of the new government’s agenda in the coming weeks and months.
Professor Sir John Curtice highlighted that, during the general election, the Conservatives performed poorly in places where over a third of families own a mortgage. He suggested this could be because of the turbulence seen in markets following the mini-budget of September 2022. During the election campaign, Labour centred its focus primarily on resolving housing supply by building 1.5 million homes over the next parliament through relaxing planning rules and permitting development in lower-quality green belt areas, or what has been dubbed “the grey belt.” However, Ms Coles said that overhauling the planning system is likely to be a “gradual and tortuous process.”
Looking ahead, Halifax predicted that property prices are expected to increase modestly throughout this year and into 2025, while other mortgage providers suggested that the end of the election campaign could boost the market. In response, housebuilder shares rose on Friday, with Persimmon, Taylor Wimpey, and Vistry Group all up around 4% following the announcement of the election results
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