UK House Prices Hit Two-Year High After Rate Cuts
House prices in the UK reached a two-year high in August, driven by increased buyer confidence following a recent interest rate cut, according to the UK's largest mortgage lender. Halifax reported that prices rose by 4.3% compared to last year, bringing the average UK property cost to £292,505. This increase comes after the Bank of England's first interest rate reduction in four years in early August. Despite this positive trend, prices remain just below the record set in June 2022, when they peaked at £293,507.
Amanda Bryden, Halifax’s head of mortgages, noted that while the rise in prices is good news for existing homeowners, affordability remains a significant hurdle for many potential buyers who are still adjusting to higher mortgage costs. Despite the rate cut, interest rates are still at 5%, their highest since 2008, when the economy was on the brink of the global financial crisis. The Bank of England is anticipated to reduce rates again this year, though the exact timing remains uncertain.
Modest growth expected as market confidence rises amidst interest rate reductions.
Bryden added that with market activity picking up and the potential for further rate reductions, house prices are expected to continue their modest growth through the rest of the year. However, the lender pointed out that the recent growth is mainly due to weak property prices a year ago, rather than any strong current market conditions.
Regional variations also highlight differing trends across the UK. Northern Ireland continues to experience robust house price growth, with prices rising 9.8% compared to last year, bringing the average home price to £201,043. In England, the North West recorded the sharpest increase, with prices up 4% year-on-year to £232,917.
Halifax's figures are based on mortgage transactions and do not account for cash buyers or buy-to-let purchases, which represent about a third of the housing market. Meanwhile, another major lender also reported similar increases in both monthly and annual property prices in August, further highlighting a positive, albeit cautious, outlook for the housing market.
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