Market resilient in spite of incessant interest rate rises

ANNUAL house price growth may have essentially flatlined in recent months but despite the incessant interest rate rises that have made life more challenging for buyers, it is striking how the market is holding up in the economic circumstances.

New figures from the Office for National Statistics this week show that average UK house prices increased by 0.6 per cent annually in July 2023. That is down from 1.9 per cent in June 2023 and far below the 13.8 per cent rate of annual house price inflation recorded back in July 2022.

The average UK house price in July 2023 was £290,000. While this was £2,000 higher than 12 months earlier, it was also £2,000 below a recent peak seen in November 2022.

But the figures show that house prices are effectively holding steady and there are signs that mortgage deals will become more affordable as the gradual reduction in inflation signals that interest rates may have reached their peak for the foreseeable future.

Reacting to this week’s ONS house price figures, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixedrate mortgages, have continued their decline in recent weeks after a period of extreme volatility. This is giving lenders the confidence to cut their mortgage rates, with a number making significant reductions and more expected to follow. The markets reacted favourably to the latest inflation data.”

Andrew Montlake, managing director of Coreco Mortgage brokers, added: “I would expect to see swap rates continue to ease over the coming days which will give lenders more ammunition to escalate the rate war which has been brewing for the last few weeks.”

However, other experts caution that it remains a buyer’s market – meaning competitive pricing will still be key for some time to come.

House prices may still have some space to drop, but the medium-term picture is looking brighter.