The average UK house price saw a modest rise in October, reaching a new record high, according to the latest data from Halifax. The typical property now costs £293,999, surpassing the previous peak of £293,507, which was set in June 2022. This marks a significant milestone in the housing market, especially considering the challenging economic backdrop.
The rise in house prices comes even as growth has slowed ahead of last week’s Budget. The housing market has faced several headwinds in recent months, including higher interest rates and affordability challenges. However, despite these factors, house prices have continued to climb, albeit at a slower pace. In October, prices increased by 0.2 per cent month-on-month, marking the fourth consecutive monthly rise. This slower growth is a notable shift compared to earlier months, when prices were rising more rapidly.
The surge in house prices has been partly attributed to the pandemic-era “race for space,” when demand for larger homes soared due to remote working and lifestyle changes. Additionally, the historically low interest rates during that period also contributed to the rise in property prices. However, with rates now higher and affordability becoming a concern for many buyers, the pace of growth has moderated.
Amanda Bryden, head of mortgages at Halifax, commented on the latest figures, saying: “That house prices have reached these heights again in the current economic climate may come as a surprise to many.” This highlights the resilience of the housing market, especially considering the challenges posed by the wider economic environment.
Bryden explained that the improvement in market activity can largely be attributed to two factors: the steady decrease in average mortgage rates since the spring and continued growth in household incomes. These factors have helped support demand for homes, even as affordability remains a concern for many buyers.
In terms of annual growth, house prices were up by 3.9 per cent from October of the previous year. However, this represents a slowdown from the 4.6 per cent increase recorded in September.
The figure also fell short of the 4.1 per cent rise that economists had predicted, according to a poll conducted by LSEG. This discrepancy suggests that while house prices are still rising, the pace of growth is not as robust as earlier in the year.
In line with Halifax’s findings, Nationwide also reported a slowdown in house price growth for October. This further underscores the cooling of the housing market, although it still reflects positive growth overall.
Holly Tomlinson, financial planner at Quilter, explained that the latest data “shows how Budget uncertainty eased the year-on-year price growth, as buyers and sellers braced for potential changes that could derail their plans.” This reflects the caution in the market as stakeholders adjusted their expectations ahead of the Budget announcements.
The uncertainty surrounding the Budget had a significant impact on the housing market, with many buyers and sellers holding off on decisions until they had more clarity on the economic outlook. As the Budget was finalised, it provided some stability, allowing the market to start adjusting.
The Budget also influenced expectations surrounding the Bank of England’s future actions. There was a shift in how fast the Bank of England would cut interest rates, with higher levels of spending and borrowing driving short-term economic growth and impacting inflation forecasts.
Despite these shifts, markets still anticipate that the Bank of England will announce a quarter-point cut in interest rates, bringing the base rate down to 4.75 per cent this Thursday. This move reflects ongoing efforts to balance economic growth while keeping inflation in check.
Alex Kerr, economist at Capital Economics, explained that the recent rise in interest swap rates — derivative products that track interest rate expectations, which mortgage rates are based on — particularly since last week’s Budget, “suggest there is scope for mortgage rates to rebound and provide less support over the next few months.” This indicates that, in the short term, the housing market may face some challenges as higher mortgage rates could put pressure on buyers.
However, Kerr also projected that, looking further ahead, mortgage rates would eventually start to fall. As a result, he expected annual house price growth to pick up, rising from approximately 3 per cent in the fourth quarter of this year to an above-consensus 5 per cent in the fourth quarter of 2025. This forecast suggests a period of recovery and growth in the housing market in the medium term.
According to the latest data from Halifax, Northern Ireland experienced the strongest property price growth of any UK region or nation, with house prices rising by 10.2 per cent on an annual basis in October. This significant increase highlights the continued demand for property in the region, despite broader economic uncertainties.
Meanwhile, London continued to have the most expensive property prices in the UK. The average price of a property in the capital now stands at £543,308, up 3.5 per cent compared to the previous year. This reflects ongoing strong demand for housing in London, despite the challenges faced by the wider market.
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