November witnessed a 0.2% increase in UK house prices, the most significant annual improvement since February 2023.
Despite this rise, house prices remain 2% lower than the previous year. The average house price now stands at £258,557, marginally down from October’s £259,423.
Robert Gardner, chief economist at Nationwide, commented said: “UK house prices rose by 0.2% in November, after taking account of seasonal effects. This was the third successive monthly increase and resulted in an improvement in the annual rate of house price growth from -3.3% in October, to -2.0%. While this remains weak, it is the strongest outturn for nine months.”
He highlighted the shift in interest rate expectations as a significant factor easing affordability pressures. Market expectations for the Bank of England’s peak rate have adjusted from an anticipated 6% to a peak of 5.25%, with a forecasted reduction to around 3.5% in the next five years. This shift has led to a decrease in the long-term interest rates underpinning fixed-rate mortgage pricing.
Gardner added: “While mortgage rates are unlikely to return to the lows seen post-pandemic, modestly lower borrowing costs, alongside solid income growth and weak/negative house price growth, should support a modest rise in activity in the coming quarters.”
However, he cautioned against expecting a rapid market rebound, citing persistent cost-of-living pressures, weak consumer confidence, and subdued new buyer enquiries. Furthermore, Gardner noted potential upward risks to interest rates, with inflation declining but domestic price pressures remaining high. “Policymakers have cautioned that it is too early to be talking about interest rate cuts,” he said, reflecting on the Bank of England’s recent stance.
Reaction
Katy Eatenton, mortgage and protection specialist at St. Albans-based Lifetime Wealth Management:
“The rate war that is raging between lenders is now really starting to ignite demand for property. People who were simply browsing on Rightmove are now turning into buyers. With 90% loan-to-value mortgages going sub-5% this week, and more rate cuts likely as swap rates edge down, first-time buyers are finally being given that all-important leg-up onto the ladder. 2023 has been a year of turbulence but as we enter 2024 things are looking a lot less bumpy.”
Charles Breen, director at Weillingborough-based independent mortgage broker, Montgomery Financial:
“The market has definitely reached the bottom now and it’s the ideal time to either buy or start getting ready to buy. Once the base rate begins to decrease, as it may well do by the summer of next year to stimulate the economy, it will cause a feeding frenzy in the housing market and prices will rise again.
“The window of opportunity will be quickly slammed shut. Oscar Wilde said “a pessimist is somebody who complains about the noise when opportunity knocks” and, in my opinion, opportunity is knocking very loudly right now for first-time buyers. Now is their chance to get on the property ladder at a discount.
“To put a rocket under the market and for it to really take off, the Bank of England needs to grow a backbone and reduce rates. People want to buy but 18 months of rate increases and a tsunami of bad news have sucked a lot of confidence out of the market.”
Emma Jones, managing director at Frodsham-based independent mortgage broker, Whenthebanksaysno.co.uk:
“With lenders now competing ferociously for business and cutting mortgage rates across the board, there may, just may, be some light at the end of the tunnel. It’s starting to feel like we have turned a corner. 2024 is shaping up to be a far more promising year than 2023 for the UK property market.”
James Bull, director at Huddersfield-based independent mortgage broker, JB Mortgages:
“House prices will always vary from region to region but they seem to be holding up better than expected. Many potential buyers who have waited in the hope of price reductions look set to be disappointed.
“Mortgage rates are still high but they have been dropping on a daily basis, and the cuts are getting ever more pronounced as lenders battle for market share. Hopefully, better mortgage rates will stimulate the flagging housing market as we head into 2024. The impact of mortgage rates on the property market is significant.”
Stephen Perkins, managing director at Norwich-based independent mortgage broker, Yellow Brick Mortgages:
“Over the past month or two, we’ve seen a significant increase in enquiries but agreed sales are still lower than usual. A lot more people are bracing to buy but we’re finding most are waiting until early 2024 to make their move.
“The Government definitely missed a chance in the Autumn Statement to kickstart the property market so we now need either further mortgage rate reductions or house price falls to ignite the market. Thankfully the former are happening on an almost daily basis.”
Steven Hargreaves, mortgage and protection adviser at the Leeds-based independent broker, The Mortgage Co:
“The ongoing reduction in mortgage rates is definitely starting to make a difference in terms of demand, although during December activity levels will likely remain muted for the usual seasonal reasons.
“A lot more first-time buyers are returning to the market and there is plenty of pent-up demand out there. The challenge remains a lack of stock and some vendors still being overly optimistic, if not outright stubborn, on asking prices.
“However, there is ordinarily an influx of new properties being put up for sale in January and this, along with mortgage rates falling steadily, means the first quarter of next year should be a strong one. There is still much further to go on mortgage rates but things are heading in the right direction. For landlords to return, we need more realistic interest rates without the very high product rates and less punitive stress testing.”
Ross McMillan, director at Glasgow-based independent mortgage broker, Blue Fish Mortgage Solutions:
“Buyer sentiment has unmistakably shifted recently, with more and more aspiring buyers officially giving up on hopes of a significant house price crash. First-time buyers, encouraged by the more favourable trend in mortgage rates, are actively planning their early 2024 purchases.
“One possible dampener is the looming General Election, which may see slower overall market activity and further exacerbate the lack of stock on the market. Looking too far ahead is a risky business but a combination of lower interest rates and pent-up demand seems likely to kick off the 2024 property market with a first-time buyer-fuelled bang. Whether the sparks are hot enough to ignite a broader market surge remains to be seen.”
Ken James, director at London-based independent mortgage broker, Contractor Mortgage Services:
“The property market is moving again. We saw a tangible increase in the level of enquiries during November. Ongoing reductions in mortgage rates, coupled with the positive news on inflation and the base rate being left on hold, have had a positive effect on sentiment and demand. The exception is in the buy-to-let market, which has been like a graveyard all year.”
Ranald Mitchell, director at Norwich-based independent mortgage broker, Charwin Private Clients:
“The property market in November was sluggish and inactive and looks set to stay that way in December. 2024, by contrast, could see all the pent-up demand from 2023 burst through, especially in the first-time buyer market. With mortgage pricing on a downward trajectory and property prices starting to look palatable, the window of opportunity is opening.”
Elliott Culley, director at Hayling Island-based independent mortgage broker, Switch Mortgage Finance:
“We have seen a definite uptick in demand from people looking to assess their mortgage options ahead of buying, but many are finding there simply aren’t enough properties to view. With mortgage payments now much more expensive, people expect more quality from a property.
“With rates reducing at some point there will be a tipping point and more properties will come to the market. It’s very difficult to judge when house prices have hit rock bottom, and there are so many variables to consider that can impact prices. If the economic forecast remains bleak and inflation continues to edge down, the Bank of England could cut rates sooner rather than later.
“For years, the Government has added stimulus to the market, such as Help to Buy and stamp duty reductions, but in the latest Autumn Statement there was nothing. The tax burden is increasing and people in the UK will have less money in their pocket. There is a chance that this could lead to a further decline in house prices.”
Peter Dockar, chief commercial officer at fintech residential mortgage lender, Gen H:
“The lack of new housing stock and some tempering of mortage interest rates for buyers have undoubtedly propped up house prices for those set on buying right now. But with housing transactions well down against long-term averages, it’s clear many potential buyers are waiting it out in the hope that either house prices or interest rates will come down in the new year. But that’s a bold bet.”
Nathan Emerson, CEO of Propertymark:
“There is no denying 2023 has been a very uneven year for the UK housing market. We have seen the most ‘unperfect storm’ of high inflation and high interest rates giving many households an unprecedented and near unworkable scenario each month.
“While there are indications a turning point maybe on the horizon, the dust needs to fully settle and we must remain prudent. Andrew Bailey, Bank of England Governor, recently suggested there will be no quick drops in base rate for the foreseeable future to keep inflation in check – so ultimately the pressure will remain on many households for a while longer yet.
“Propertymark remains optimistic the entire UK housing market will steadily gain traction, but it’s unlikely to be a quick process.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman,:
“These figures confirm what we’ve seen in our offices – the market is still baring its teeth. Despite a 15-year high in base rate and continuing inflation, buyers are showing there is little chance of a correction, although sales are taking longer and prices are softening. Strong employment is also supporting activity.
“We don’t expect to see much change in the months ahead but a gradual improvement as optimism always seems to become more apparent at the beginning of the year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“While interest rates appear to have peaked, those hoping base rate will move swiftly downwards again to the rock-bottom levels of the recent past are likely to be disappointed. Pricing is higher than borrowers have grown used to over the years, meaning those buyers relying on mortgages are more price-sensitive on the back of ongoing affordability concerns.
“The direction of travel for new mortgage rates is downwards, with a number of lenders making reductions this past week and bringing some early Christmas cheer to borrowers. With two and five-year fixes available from below 4.5%, we may be in a higher interest rate environment but rates are becoming more palatable.”
Alan Davison, director of customer sales at Together:
“The rise in house prices will be frustrating for first-time buyers aiming to get their foot on the ladder ahead of the New year, particularly as we enter the seasonally quieter period.
“However, from the start of 2024, we’re expecting a further softening in demand from amateur buy-to-let landlords and with it an injection of high quality, smaller homes which will offer new opportunities for buyers. With the succession of tax and regulatory changes, as well as the continued pressure on costs versus potential yields, this is already unfolding which will see activity steadily tick over.
“The Chancellor offered developers a helping hand last week, with his promise to remove some of the red tape around planning applications as part of his commitment to “help grow the economy”. Proof will be in the pudding, but hopefully there should be more available housing in the next 12 months onwards.”
Tomer Aboody, director of property lender MT Finance:
“With November’s price rise suggesting more confidence in the market, have we seen the topping out of interest rates with potentially some reductions to come in 2024?
“Some Government stimulus will be needed to get things moving and help the market recover. We need more stock to come to market in order to keep prices in check and for transaction numbers to improve, which can come via a form of stamp duty restructure.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“Higher base rates are designed to cool demand and therefore pricing in the economy. This cooling of house prices, at least in nominal terms, suggests it is working to plan.
“House prices are also still coming down from a bubble caused by Covid and Stamp Duty reductions, which created double-digit house price growth for much of the last three years.
“The truth is that the housing market is not one market. Different geographies, types of property and situations for buyers and sellers create huge variation in pricing trends locally. For investors, the big opportunity is to use the plethora of data now available to identify the lowest risk, highest yield areas, and then within these selected areas to identify well-priced assets.”
Karen Noye, mortgage expert at Quilter:
“The latest UK house price figures paints a picture of a market cautiously tiptoeing towards some semblance of stability. November’s 0.2% bump in house prices, according to Nationwide, is a small but significant signal of recovery in a year that has seen a 2% dip compared to its predecessor. This slight uptick on the meteorological first day of winter is like a green shoot of recovery for the housing market hinting at potential growth amidst challenging conditions.
“Data from the Bank of England earlier this week showed that mortgage approvals, too, are inching upwards, with October witnessing a climb to 47,400 from September’s 43,300. This also shows signs of life in a market that’s been under the weight of economic uncertainty and high interest rates.
“Yet, the broader picture remains one of caution. The staggering 21% year-on-year fall in residential transactions, also released this week, muddies the picture and echoes the market’s hesitation. It’s a clear sign that many are still waiting for a more favourable wind in terms of house prices and mortgage costs.
“Limited housing stock and high rental costs are nudging people towards buying, yet the high cost of mortgages and economic uncertainties are weighing heavy on budgets holding back a full-scale market revival.
“The balance of recovery will hinge on how interest rates and the broader economic picture evolve in the coming months.”
