A home in the UK now costs £286,000 on average
(Picture: Shutterstock / ZGPhotography)The cost of an average house in the UK has risen by £47,500 in two years but the cost of living crisis and rising interest rates will soon cool the market, Halifax says.
The average cost of a home rose by 1.1 per cent in April to a record high of £286,079, according to the latest Halifax House Price Index. It marks the tenth consecutive monthly rise, the longest run of increases since 2016.
However, the rate of growth is slowing, with April’s rise lower than the 1.4 per cent increase in March. At the current rate of growth, Halifax said the average home could hit £300,000 by the end of this year but the lender said this “remains unlikely” given rising interest rates and the cost of living crisis.
The index also showed the rate of annual house price inflation in London continues to lag the rest of the UK, with prices now up by 6.2 per cent year-on-year. However, average property values in the capital remain much higher than the rest of the country, with the latest average house price figure of £537,896 — a new record for the city.
Russell Galley, managing director at Halifax, said the ongoing imbalance between supply and demand was still driving up prices and for now, the strong increases in house prices show “little sign of abating”.
However he added the “headwinds” facing the wider economy will likely have an impact on house prices by the end of the year. “The house price to income ratio is already at its highest ever level, and with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year.”
Tom Bill, head of UK residential research at agent Knight Frank, said: “We appear to have reached the summit of the recent period of UK house price growth. We don’t expect prices to fall but we are presumably in the final month or two of double-digit annual growth.
“The psychological impact of a rising base rate above 1 per cent, higher mortgage rates, a cost-of-living squeeze and the gradual rebuilding of supply will all contribute to the slowdown as house prices come back down to earth later this year.”
The Bank of England increased interest rates on Thursday to the highest level in 13 years. The decision to hike interest by 0.25 per cent triggered an immediate rise in housing costs with higher monthly payments for roughly one in four homeowning households with tracker, discount or variable rate mortgages.
Amanda Aumonier, Head of Mortgage Operations at online mortgage broker Trussle, said: “It’s only a matter of time until the cost of living crisis begins to catch up with the housing market. Households are beginning to feel the effect of inflation, higher energy bills and the soaring cost of living and so are cutting back on day-to-day essentials. This will likely get worse with increasing interest rates. This week’s interest rate rise could add an additional £340.56 to annual mortgage payments alone.”
Halifax said its data shows housing demand is focused on larger family homes rather than flats, with the price of detached and semi-detached properties rising 12 per cent annually, compared with 7.1 per cent for apartments.
Tomer Aboody, director of property lender MT Finance, said: “The trend and desire for buyers needing more space has never been more obvious with detached properties increasing in value by five times more than flats.
“This is also a result of a low interest rate environment, with buyers pushing themselves in order to buy their dream home, which increasingly may not be achievable with higher inflation and interest rates on the rise.”
