Many indices suggest house prices have already dipped, at least slightly, but “forward-looking indication don’t look brilliant either” according to one market analyst.
Data released by the Office for National Statistics yesterday, but referring back to January, show that average house prices in the UK increased 6.3 per cent annually, slowing sharply from a 9.3 per cent annual increase in December.
The average house price was £290,000 in January, some £17,000 higher than in January 2022.
However, Sarah Coles – head of personal finance at business consultancy Hargreaves Lansdown – warns that worse may be to come.
“January was a miserable month for property. Three months on from the peak of mortgage rates in October, the horror of higher mortgages fed through into falling prices. We can expect more weakness from here, as prices continue to fall, but the jury is still out on how low things will go.
“Affordability calculations reveal just why rising rates have taken such a toll on buyer confidence. With the average full-time employee in England spending 8.3 times their annual income in order to buy a typical home, we’re being forced to take on ever-larger mortgages. It means a small change in mortgage rates has a far larger impact on our monthly payments.
“On the positive side, from October onwards, mortgage rates started to drop back, and while there were no sudden movements, there’s the hope that as they kept falling, confidence will have started to rebuild a little. We’ve seen a bit more volatility recently, but rates are still expected to trend downwards through the rest of the year as inflation eventually drops back.”
She continues: “Most of the forward-looking indications don’t look brilliant either. The Bank of England said that in January the number of mortgages approved for purchases in coming months fell for the fifth month in a row, and excluding the onset of the pandemic – when the market was effectively closed – it’s the lowest level of approvals since 2009.
“Meanwhile, Zoopla has found that home sellers are cutting prices by an average of £14,100 – or 4.5 per cent to shift their properties – and RICS continues to chart the fall in demand from buyers. If you’re planning to buy, the likelihood of falling mortgage rates and falling prices may persuade you to put off a purchase.”
