UK’s largest lender reports house prices at record high

07 November 2024 , 09:50

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UK’s largest lender reports house prices at record high

Reeves’s budget could slow demand but prices have not fallen significantly since post-pandemic ‘race for space’

The average price of a home in the UK is at a record high but demand could slow as a result of policies in Rachel Reeves’s budget, Britain’s biggest mortgage lender has said.

Halifax’s monthly house price index found that the cost of the average home hit £293,999 in October, the highest ever recorded, outstripping the £293,507 reached in June 2022. 

The 0.2% rise in October is the fourth consecutive month of growth, and brought the annual growth rateto 3.9%, from 4.6% in September.

The figures suggest homebuyers shrugged off concerns about what would be contained in the chancellor’s debut budget, delivered at the end of October. However, Halifax said measures included in the speech could affect future demand.

Amanda Bryden, the head of mortgages at Halifax, said that, while it was a surprise that house prices had passed the level seen in June 2022, particularly with the headwind of higher interest rates, it was more noteworthy that prices had not fallen significantly since that point.

In June 2022 the country was coming out of the pandemic, with pent-up demand to buy homes and a “race for space”, she said.

Halifax also said market activity had improved recently, despite the continued affordability challenges around higher mortgages, with the level of mortgages agreed at its highest level in two years.

However, Bryden said the rate at which mortgage rates will continue to fall will be hindered by policies put forward by Reeves in her budget last week.

“Following the budget, markets expect the Bank of England to cut rates more slowly than previously anticipated, which could keep mortgage costs higher for longer,” she said. “New policies, like higher stamp duty for second-home buyers and a return to previous thresholds for first-time buyers, might also affect demand.”

While the lender expected house prices to keep growing, that growth would be “at a modest pace for the rest of this year and into next”.

Reeves increased stamp duty on buy-to-lets and second homes from 3% to 5%, and scrapped the temporary increase on purchase price for nil rate of stamp duty, the sale figure before consumers have to start paying the tax. The nil rate for first-time buyers will decrease from £450,000 to £300,000, and for those buying an additional home from £250,000 to £125,000.

Northern Ireland continued to be the area of the UK with the highest price growth, with the average property costing £204,242, up 10.2% on the previous year.

The north-west was the region of England with the strongest price growth, up 5.9% on last year, with properties now costing £235,587 on average.

In London the average property now costs £543,308, up 3.5% on last year.

James Smith