The UK housing market has recorded its fifth consecutive monthly increase, with average house prices rising by 0.4% in February, according to Halifax Mortgages.
This brings the typical UK home’s cost to £291,699, which is roughly £1,000 more than the previous month, and marks a 1.7% increase on an annual basis, although this is a deceleration from last month’s 2.3% growth.
Kim Kinnaird, director at Halifax Mortgages, said: “UK house prices rose for the fifth consecutive month in February, up by +0.4% or £1,091 in cash terms, with the average house price now £291,699.
“On an annual basis, house prices were +1.7% higher than a year ago, slowing from +2.3% in January. However, these figures continue to suggest a relatively stable start to 2024 and align with other promising signs of increased housing activity, such as mortgage approvals.”
Kinnaird further explained the challenges and uncertainties facing the market: “Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.
“Raising a deposit and affording a mortgage remains challenging, especially for first-time buyers, so there could be a slowdown in the housing market this year.”
Regionally, Northern Ireland showed the strongest growth, with house prices rising by 5% annually to an average of £195,956.
The North West, North East, and Wales also saw significant increases. London’s average house price remains the highest at £536,996, marking a 1.5% annual increase, the first positive growth since January 2023.
Conversely, Eastern England experienced the most considerable decline last month with an average price drop of 0.8%.
Nathan Emerson, CEO at Propertymark, added: “The start of 2024 continues to look positive for many homeowners who are hoping to sell their home or jump on the property ladder.
“Our member agents reported that there has been an 89% increase in new properties coming onto the market and a 129% in the number of market appraisals undertaken.
“The Bank of England recently stated that they do not have to meet the target of cutting inflation down to 2% before they start cutting interest rates.
“To encourage more people to sell their home this year, the Bank of England should consider reducing interest rates to ease borrowing costs for aspiring homeowners.”
Further reaction
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages:
“There is an air of hesitation in the mortgage and property markets at present. The mortgage rate rises of the past month or so have created uncertainty among prospective buyers. Yes, there could be a slowdown this year but equally, a cut in the base rate could see things accelerate noticeably. A lot is riding on the next set of inflation data. With recent mortgage rate increases and house prices rising slightly, indecision could prove costly for some buyers.”
Darryl Dhoffer, adviser at Bedford-based The Mortgage Expert:
“The feel-good factor caused by the mortgage rate war saw 2024 begin on a positive note but then, as rates started reversing, demand started to level off a bit. That appears to be reflected in this data. The Budget may also have seen some buyers hold off in expectations of an incentive that didn’t come. Predictions by the Office of Budget Responsibility that inflation could go below target in just a few months could see the fireworks restart if the Bank of England cuts the base rate. All eyes are now on the Monetary Policy Committee. That first rate cut, when it comes, will be the boost the market needs.”
David Sharpstone, director at Braintree-based CIS Mortgage Advice:
“Lower mortgage rates were definitely the trigger of increased activity in the property market at the beginning of the year. But as mortgage rates reversed, so some buyers reversed back into their shells. Forecasting future house prices is challenging due to the multiplicity of economic variables.
“However, strong housing demand and historical supply shortages suggest that, while massive price surges are unlikely, equally unlikely is a significant market slump. The market is adjusting to the new norm in mortgage rates and, barring any major economic upheavals, and depending on what happens in Ukraine and the Middle East, it’s expected to remain stable. Overall, I expect a stronger 2024 for the housing market compared to 2023.”
Chris Barry, director at London-based conveyancer, Thomas Legal:
“Demand increased quite substantially in February as mortgage rates started to tick up again. This may feel like an unusual reaction but after speaking to hundreds of borrowers last month, a common theme seemed to be that people were holding off while rates were coming down, trying to time the bottom. As rates unexpectedly started to tick up, buyers who were poised jumped on the chance to secure a rate before they climbed further and then immediately set to work to secure a property before their new mortgage rate expires. Agents and brokers in my network have been sharing how unseasonally busy they were and this will translate into activity levels through March and beyond.”
Andrew Montlake, managing director at London-based broker, Coreco:
“The housing market continues to show a robustness that is flummoxing many house price crash activists. Much of this is down to the fact that despite a recession and a cost of living crisis, employment remains strong and demand for property still outweighs supply in many key areas of the country. With the fear of mortgage rates continuing up to 6% and beyond abating, and borrowers having had some time now to anchor themselves to the new world of mortgage rates, it looks like anything other than a small overall correction in house prices is overstating things.
“Much now depends on the next set of inflationary figures, but the public are crying out for a rate cut, rather than any more talk of potential rises. What happens to mortgage rates will ultimately define the housing market this year. What we are, however, seeing is a growing number of prospective buyers looking to do something this year rather than keep their lives on hold any longer.”
Riz Malik, director at Southend-on-Sea-based R3 Mortgages:
“After the Budget did nada for the property market, our attention turns back to the Bank of England. We need a base rate cut now, even 10 basis points, to start bringing back confidence, which this market desperately needs.”
Graham Cox, founder at Bristol-based broker, Self Employed Mortgage Hub:
“February was a slightly quieter month than January for us, but it’s hard to know if that’s due to mortgage rates increasing, or just the slowdown after the New Year rush. Either way, what would improve market sentiment is a base rate cut. We’re in a little bit of a limbo phase, waiting for inflation to fall further and a General Election to be called. Without any sense of direction, my best guess is property values fall slightly this year, by perhaps 5%.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“While there is often an over-concentration on house prices, when it comes to the health of the housing market, prices impact buyer and seller confidence.
“Rising prices, while not good for those trying to get on the ladder, seem to suggest that the market is picking up, although transactions and affordability, which are most stretched in higher value areas such as London, are arguably more relevant.
“Aspiring first-time buyers are having to rent for longer as higher interest rates and stricter lending criteria are making it harder to save deposits and step on to the ladder, which is also keeping rents at high levels.
“In our offices, we continue to see more valuations, listings and especially viewings as buyers and sellers feel that inflation is moving in the right direction and interest rates will come down at some point. With affordability still a concern, competitively-priced properties are attracting the most attention.”
Tomer Aboody, director of property lender MT Finance:
“Another strong month in house price rises underlines the confidence being felt in the market.
“Stable interest rates, a reduction in mortgage rates compared with last year and less than half the inflation, have combined to persuade buyers that it is now time to buy as we head into what is traditionally a busier spring market.
“Unfortunately, the Chancellor missed an opportunity to incentivise sellers to put their homes on the market, as a reduction in stamp duty would have given the market a welcome boost and encouraged all-important transactions.”
