In August, UK house prices surged to their highest point in two years, driven by increased confidence among homebuyers following the recent interest rate cut, according to the UK’s largest mortgage lender, Halifax. The average cost of a property in the UK rose to £292,505, reflecting a 4.3% increase compared to the previous year. This growth follows the Bank of England’s decision to lower interest rates at the beginning of the month, marking the first cut in four years.
Halifax, which is owned by Lloyds Banking Group, noted that while the average property price is now just shy of the record high of £293,507 seen in June 2022, buyers have gained renewed confidence with the interest rate reduction.
Modest Market Growth Despite Affordability Challenges
Amanda Bryden, head of mortgages at Halifax, commented that while the rise in prices is a positive development for current homeowners, many potential buyers are still struggling to afford homes. “Affordability remains a significant challenge,” Bryden said, noting that the increase in mortgage costs over the past year has left some prospective buyers rethinking their budgets.
Though interest rates were reduced, they remain high at 5%, their peak since 2008 when the global financial crisis impacted major economies. As a result, first-time buyers and those looking to move are carefully monitoring mortgage rates and property prices.
Limited Mortgage Rate Relief
Following the interest rate cut, home loan deals have slightly improved. The average two-year fixed-rate mortgage decreased from 5.77% to 5.54%, offering some relief to borrowers, but not a significant enough shift to make a substantial difference, according to Sarah Coles, head of personal finance at Hargreaves Lansdown.
Coles explained that while the rate cut had an immediate impact, it wasn’t a game-changer for those looking to secure lower mortgage payments. However, with further rate reductions expected later this year, many buyers remain hopeful for more favourable terms. The Bank of England’s next decision is set for 19 September, and any further cuts could spark more movement in the housing market.
Regional House Price Trends
Halifax reported that house prices rose by 0.3% in August, down from a 0.9% increase in July. This modest rise in prices, Halifax suggests, is largely due to weaker property prices this time last year, rather than a marked increase in strength now.
Northern Ireland remains one of the UK’s strongest property markets, with prices rising by 9.8% year-on-year, bringing the average home price to £201,043. Meanwhile, the north west of England saw the sharpest growth in England, with house prices up by 4% to an average of £232,917.
While growth has been steady, many prospective buyers, especially first-time purchasers, hope for a continued period without runaway price increases as they monitor deposit requirements and mortgage rates.
