House prices remained steady in January with a 0% change on a monthly basis, according to the latest Halifax House Price Index.
On a quarterly basis house prices were down 3.6% but they are still some 1.9% higher than they were in January 2022.
The average price of a home now costs £281,684.
Kim Kinnaird, director, Halifax Mortgages, said: “The start of 2023 has brought some stability to UK house prices, with the average house price remaining largely unchanged in January at £281,684, a very small decrease on December.
“This followed a series of significant monthly falls at the end of last year (-1.3% in December and -2.4% in November).
“The pace of annual growth has continued to slow, to +1.9% (from +2.1% in December), which is the lowest level recorded over the last three years.
“The average house price is now around £12,500 (-4.2%) below its peak in August last year, though it still remains some £5,000 higher than in January 2022 (£276,483).
“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years.
“As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”
Reaction
Marc von Grundherr, director of Benham and Reeves:
“Given the strong economic headwinds that battered the UK following last September’s mini-Budget, it’s quite remarkable that the property market has remained largely impervious to any notable decline in house prices.
“With that storm now weathered and confidence returning to the market, the previous monthly house prices declines seen at the back end of last year have already amounted to little more than a seasonal cough and cold.”
Iain Crawford, CEO of Alliance Fund:
“The property market is yet to buckle under the pressure of wider economic uncertainty and while we’ve seen house prices start to cool in recent months, it’s important that we proceed with pragmatism.
“Yes, the increasing cost of borrowing has resulted in buyers entering the fray with less gusto and the price achieved by sellers has reduced as a result. But what we’re certainly not seeing is a mass exodus of buyer activity and an impending market collapse.”
Colby Short, co-founder and CEO of GetAgent.co.uk:
“We can’t ignore the fact that the cost of borrowing has climbed, putting further strain on the nation’s homebuyers and their ability to climb the ladder.
“This has naturally resulted in a reduction in the rate of house price growth but we’re also seeing a head in the sand approach from many sellers, who are entering the market with over optimistic expectations based on a price that they may have achieved six months ago.
“In doing so, they are slowing the market to a far greater extent than the marginal reduction in buyer activity, as their overpriced properties stagnate with little to no interest.
“The market remains robust and there is still a fair price to be had, but it is vital sellers wake up to the fact that they may need to drop a few thousand pounds in order to secure a sale.”
James Forrester, managing director of Barrows and Forrester:
“All things considered, the property market has fared far better than many were quick to forecast and we’ve already seen the rot reverse with respect to the previous monthly reductions in property values.
“This is despite the government’s best efforts to drive the wider economy into the ground whilst hiking the cost of borrowing for hard pressed homebuyers, buyers who have already had to contend with record rates of house price growth and a lack of housing delivery.
“Now that the dust has settled, don’t be surprised to see the property market stabilise following this period of adjustment and positive house price growth to return over the coming months.”
Jason Ferrando, CEO of easyMoney:
“Despite last week’s further hike to interest rates, we’re simply not seeing the same level of market volatility that came during the latter stages of last year, particularly within the lending space.
“So while buyers may be treading with a greater degree of caution, the vast majority are continuing to stride forward with intent. This consistent level of activity will ensure that the market remains in good health, albeit having seen marginal correction to property values.”
Katy Eatenton, mortgage and protection specialist at St. Albans-based Lifetime Wealth Management:
“Though the annual rate of house price growth slowed last month, and prices are down on the quarter, for January to flatline shows the fallout from the mini-Budget may now be behind us. Fixed rates are falling daily and the price war among lenders appears to be supporting the property market. However, while fixed rates falling is brilliant news, those that are completing purchases or remortgages imminently will miss out on further future reductions unless they go for a tracker with no early repayment charges for the next few months until fixed rates stabilise and then switch over. The downside to a tracker, of course, will be if the Bank of England raises the base rate again towards the end of March.”
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents:
“Activity was far busier than expected in January given that buyers went into hibernation at the tail end of last year following the mini-Budget. This may explain why prices stayed flat rather than fell last month. After a quiet first half of the month, once the schools returned buyers and sellers alike were back in touch and we started to see some pre-pandemic seasonality return to the market. At the moment, discretionary buyers are staying at home but those with a compelling reason to move are active, albeit often with revised budgets given affordability due to higher rates and inflation. Given the current level of buyer activity, we expect prices to hold and perhaps even increase marginally throughout the year. Last week’s base rate increase appears to have had little impact on buyers, and with mortgage rates continuing to trend downwards, albeit marginally, market confidence remains stable.”
Zaid Patel, director at London-based estate agents, Highcastle Estates:
“January was far stronger than we’d expected and this data underlines that. The first week back was very quiet, as usual, but now we have four sales agreed. Two buyers are investors and the others are first-time buyers. The first-time buyers met the asking price, as neither vendor was rushing to sell. In comparison, the investors both had offers accepted 10%-15% below the asking price, as both sellers are landlords now on a variable interest-only mortgage, which has increased considerably. This weekend we have an open house for a property that needs complete refurbishment. There are 37 buyers booked in, varied between first-time buyers and investors, with four cash offers under asking price already on the table. Still, we’re confident we can achieve above asking price. There’s life in the property market yet.”
David Conway, director of Woodford Green-based mortgage broker, Clayhall Financial Services:
“The property market was buoyant in January, after a juddering December. There’s almost a ‘feel good factor’ emerging as buyers are surprised at access to fixed rates of around 4%. Mortgage rates are on a downward spiral. The current 2-year swap rate is almost 4% and the 5-year at 3.25%. Borrowing at 3% will still seem cheap even if it’s double the rates of recent times, and expect that pattern to continue. Lender confidence has them actively competing for buyers’ business and they are also being innovative in the buy-to-let market. With affordabilty and lending calculations expected to improve, unemployment now predicted by the Bank of England to not rise as much as expected and inflation slowly getting back under control, 2023 should be a year of recovery not carnage. The projected house price drops should be nothing but a blip.”
Steven Morris, director at Bristol-based independent mortgage broker, Advantage Financial Solutions:
“Though the property market is still under pressure, the fixed rate mortgage price war currently raging and the fact prices were flat in January shows there’s light at the end of the tunnel. Every time we apply for a fixed rate for a customer, within no time it’s cheaper elsewhere. I am currently on application number six for the same client in a bid to get them the best deal, which must be a personal record since I started advising back in 2008. On the one hand, it’s great, but on the other, it’s outright insomnia.”
Luke Thompson, mortgage adviser at King’s Lynn-based PAB Wealth Management:
“I had a customer last week who was able to save over £150 a month compared to the interest rate I was originally able to offer them back in December. In short, the mortgage market is really starting to improve and this will eventually feed through into the property market. The fact that prices didn’t fall in January may suggest it already is. It is important to remember that back in September and October of last year, due to the mini-Budget, there was a significant amount of turmoil in the money markets and this caused rates to have no real correlation to the Bank of England base rate. What we have seen recently is the return of normality to the markets, which has meant that lenders have been able to reduce their rates. In addition to this, fewer buyers due to a slowdown in the property market has meant lenders have had to start competing for business, which has triggered the fall in fixed rates over the past month or so.”
Gary Bush of the Potters Bar-based MortgageShop.com:
“January was busier than expected, showing signs that the general public has now factored the higher fixed rates into their budgets. We are optimistic that the UK property market in 2023 will represent good value to buyers and be a busy period on the whole. The expected 0.5% increase, last week, in the Bank of England base rate was already baked into lenders’ fixed rates and, encouragingly, we saw a fixed rate at sub-4% appear for the first time in a while. We’re seeing a mixed bag of applicants coming to us, mainly remortgagors and first-time buyers. Affordability is tricky with lenders’ black box guided criteria proving troublesome.”
Nicola Schutrups, managing director at Southampton-based mortgage broker The Mortgage Hut:
“We’ve seen inbound enquiries from new customers increase to “pre-Truss” levels with lots of customers now coming to terms with the rate shock they had in Q3 and Q4 of last year. Activity in the market for us has gone from around 40 customers a day contacting us to around 80 a day, which is nearly back to our normal average during the height of the market. Customers seem more confident that rates are coming towards their peak and, as with all markets, there is a necessity to move, whether that be through marriage, divorce, birth, death or something else. What we have noticed is a shift in customer preferences back towards shorter fixed rates and also discounted and tracker rates as the perceived risk of increasing rates reduce.”
Gaurav Shukla, mortgage adviser at London-based broker, Home Me:
“The first couple weeks of January were quiet, which was the usual hangover from Christmas. Since then, it’s been much busier with a lot more first-time buyers coming back to talk to us. I suspected this would be the case as fixed-rate mortgages have been reducing consistently. The housing market in 2023 won’t be as bad as first feared and I genuinely believe we are heading in the right direction. Affordability is still an issue for buyers at the moment, especially those with existing debts or on incomes lower than £50k, as the cost of living has increased and with energy prices due to rise again, this will have further impacts. Towards the end of the year is when we will see affordability eased further off, as energy prices hopefully come down.”
Gindy Mathoon, founder of Derby-based mortgage broker, Create Finance:
“Although the base rate rose last week, the price of fixed rates is coming down. As fixed rates decrease from the highest levels seen in a number of years in October 2022, the enthusiasm among homeowners looking to move is reappearing again. During the start of the pandemic we saw fixed rates in and around the 3% mark. Fast forward to today and fixed rates just above 4% are available and, for a number of borrowers, this isn’t such a drastic increase in monthly payments. Getting the loan amount you actually require can be an issue unless you’re a high income earner with a salary of typically £70,000+. Accord, HSBC, NatWest, Halifax can lend 5.5x income multiple for larger income earners, which can boost affordability. However stringent affordability rules are affecting those households with lower incomes.”
