What is happening to UK house prices?

August 15, 2024 by Mark

House Prices

It will not come as any form of surprise to those who are trying to buy or sell their homes that the property market in the UK has undergone a turbulent period. The after-effects of the Covid-19 crisis, coupled with other economic factors, have influenced everything from house prices to mortgage rates.

When it comes to the former, this year so far has brought a small rise in average prices, but mortgage rate levels have prevented a more notable increase. Land Registry figures indicate that the average price has risen by 2.2% compared with last year, taking it to £285,000 by late spring.

This is the situation as it stands right now, but will it remain the same moving forward?

Are house prices in the UK rising?

The best source of information on the house price situation for each part of the UK is the Land Registry. The House Price Index that it publishes uses data taken from completed sales, not from current asking prices, which makes it a more reliable indicator of trends. As mentioned in the introduction, the House Price Index for May 2024 shows an average national price rise of 2.2%. That compares with an increase of 0.7% for the period from May 2022 to May 2023. So yes, house prices are rising in the UK, and the level of year-on-year growth has improved.

The index also provides us with more in-depth data on the subject though. For instance, it compares the average price paid by different groups of buyers entering the market. What this comparison shows is that prices are currently much higher for people looking to move from one home to another than they are for first-time buyers. The average price that the former are currently paying is £332,000, while for the latter it is £238,000. That adds up to a price differential of £98,000.

It is not only the Land Registry data that shows prices to be going up, though. Figures published by Halifax, Nationwide, Zoopla and Rightmove all agree, with the only difference being the size of the increase. Nationwide and Halifax are closest to the Land Registry figure, at +2.1% and +2.3% respectively. Zoopla record a much lower rise of 0.1%, while Rightmove have it at 0.4%. The Land Registry House Price Index is probably the most reliable source though, for the reason cited above.

Its data also analyses prices by UK region. The May index shows that there has been an annual rise in house prices for every region of the country. Yorkshire & Humber (+3.9%), the North East (+3.7%) and the East Midlands (+3.2%) are the regions that experienced the highest year-on-year price growth.

How high will mortgage rates go in 2024 UK?

There have been a series of increases in mortgage rates after a long period in which they were very low, due to inflation. That has left many existing mortgage holders struggling to meet rising repayments and has also made the prospect of buying more daunting for anyone not already on the property ladder.

The current forecast is for rates to fall rather than rise, and there are good reasons for that. August saw the Bank of England reduce the base rate to 5%, which was the first time this had happened since March of 2020. The response from lenders has been swift, with a flurry of interest rate cuts. There is still fluctuation within the market though, making it sensible to talk to a professional advisor with the CeMAP qualification

Signs are all good at the moment, as the Bank of England is suggesting the base rate may be brought down below 5% towards the end of the year. Average rates for fixed two-year loans were 4.59% at the end of July, which is already much lower than the 6.86% figure for the same time the year before. Further rate drops should follow, but it may be some time before they return to the levels of December 2021, when they were at 2.34%.

Will UK house prices go up in 2025?

Experts from organisations like Zoopla, Rightmove and Halifax have forecasted a fall of anywhere from 1% to 3% in house prices, but that has now changed. A combination of falling inflation and mild improvements to the economy means that house price rises are now being predicted. Savills expects an increase of 2.5%, while Knight Frank is forecasting a 3% rise.

The overall housing market situation is improving, which will be welcome news to the public and those with CeMAP training.