According to Halifax’s data, house prices have dropped for the first time in six months. It is said that they dropped by one per cent in March of this year, partially due to higher mortgage rates having a major impact on affordability for potential buyers.
The average house price fell by about £2,900 to £288,430. To put it into perspective, the average house has been estimated to have fallen by £2,900 for a property worth £288,430. For more on this issue, this google article may be helpful.
But with that in mind, Halifax also said that house prices are still higher than they were last year. Prices were 0.03% higher last March than in comparison to the year before, although that was a reduction from the 1.6% annual increase that occurred in February.
How rising rates are affecting buyers
Affordability
The director of Halifax, Kim Kinnaird has spoken out, saying that the monthly drop in February and March wasn’t unexpected, particularly due to the reset that the housing market has been progressing through since the substantial rise in interest rates that began occurring back in 2022.
But despite these difficulties, house prices have been unexpectedly resilient when faced with the substantially higher borrowing costs.
The challenges found in the limits of affordability continue to be an obstacle for many potential buyers. Meanwhile, established homeowners on less expensive fixed-term deals have not yet begun to feel the impact of higher interest rates.
When looking into purchasing a property, getting assistance from a concierge conveyancing service is advised by many. Specialist conveyancing firms such as https://www.samconveyancing.co.uk/ may be helpful in such endeavours.
What other lenders and experts are seeing
Halifax’s data echoes their fellow lender Nationwide who, earlier this week, reported a drop in house prices last month.
The head of personal finance – Sarah Coles – at Hargreaves Lansdown has spoken out saying that rising mortgage rates have begun to take a toll on the market.
In February the company had a price momentum of buyers, those who had already agreed to less expensive mortgages back in January. But now that’s fading out and prices have dropped.
Why interest rates rose in the first place
Inflation
Interest rates in the UK hit noteworthy lows during the two-year pandemic. The Bank of England started raising their rates near the end of 2021 to control inflation.
This had a butterfly effect, of sorts, on mortgage rates, which in turn also started to increase. The result of this increase was that borrowing money for purchasing a home became a lot more expensive.
Last summer, mortgage rates reached their peak and began to drop as expectations increased that the Bank of England would begin to lower their interest rates this coming year. This news led to an increase in activity in the market.
Summary
This article reports that UK house prices fell by 1% in March, per Halifax, taking the average price down about £2,900 to £288,430, though prices remain slightly higher than a year earlier. It explains rising mortgage rates are squeezing affordability, tracing this to the Bank of England raising rates since late 2021. It notes Nationwide reported a similar drop, with experts describing a reset.
Questions this article raises
- How much further are house prices expected to fall before the market stabilises?
- When is the Bank of England expected to start cutting interest rates again?
- How are homeowners on fixed-rate deals likely to be affected once those deals expire?
