Industry figures welcome house prices increase and more enquiries
With house prices rising for the third month in a row – higher than they have been in over two years – and new data suggesting that improved affordability and lower interest rates are tempting first-time buyers, there is tangible evidence of a recovery in the property and mortgage markets.
Property prices rose by 0.3% in September, according to the Halifax House Price Index – and year-on-year prices are up 4.7%, the strongest rate since November 2022. Furthermore, a typical property now costs £293,399 (compared to £292,540 in August) – the highest since June 2022.
There is encouraging news for first-time buyers too – the average amount paid by those stepping onto the property ladder is now around £1,000 less than two years ago, a decrease of around 0.4%, Halifax suggests.
"It’s essential to view these recent gains in context,” explained Amanda Bryden (pictured left), its head of mortgages. “While the typical property value has risen by around £13,000 over the past year, this increase is largely a recovery of the ground lost over the previous 12 months. Looking back two years, prices have increased by just 0.4% (£1,202).
"Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40% in the last year and now at their highest level since July 2022.”
Bryden added: “While improved mortgage affordability should continue to support buyer activity – boosted by anticipated further cuts to interest rates – housing costs remain a challenge for many. As a result we expect property price growth over the rest of this year and into next to remain modest.”
Cautious though Bryden’s words undoubtedly are, note the word ‘growth’ – the market appears to be moving in the right direction.
How much activity is there among first-time buyers?
A report from Legal & General Mortgage Services, yesterday, supported this positive trend, suggesting increased activity. Searches by brokers on its platform, on behalf of first-time buyers, grew 9.1% in September, following a 5.4% increase in the previous month. Searches for ‘maximum age’ increased by 19.8%, while searches for ‘Maximum Loan Term’ surged by 27.9% in September. Intriguingly, searches for ‘EPC rating’ increased by 53.5% last month, indicating a growing interest in green and EPC-related mortgages.
“Lenders continue to reduce their mortgage rates, which is encouraging buyers to make their move,” declared Mark Harris (pictured centre), chief executive of mortgage broker SPF Private Clients. “The Bank of England Governor’s comments about a more aggressive approach to rate setting should feed through to even lower mortgage pricing.
“Several lenders repriced downwards last week, including HSBC, NatWest, Barclays and Santander. Two-year fixes are now available from 3.84%, while the cheapest five-year fix is pegged at 3.68%, which will prove to be more palatable for borrowers than some of the higher rates they have been paying recently.
He added: “This ongoing rate war among lenders is great news for borrowers as there are some really compelling deals being launched, which will go some way to helping affordability."
David Hollingworth (pictured right) , associate director of communications at broker L&C Mortgages, was impressed with the “remarkable resilience” of house prices bouncing back after a difficult couple of years.
“With interest rates now beginning to ease and the direction of travel looking far more likely to bring further improvements, it looks likely that more buyers will gradually return to the market,” he commented. “The hopes for next year will certainly be to see a more active purchase market.”
Hollingworth noted the strong demand of first-time buyers.
“Their resolve to buy is only likely to be stiffened when they can see prices continuing to rise,” he observed. “At the same time, they are potentially also facing rising rents so little gets easier in terms of affordability and building a deposit. The recent focus of lenders on first-time buyers will therefore be important in giving them a leg up onto the property ladder.
“At the same time existing homeowners that have been coping with higher mortgage payments will at least take some comfort that their equity should be largely preserved, enabling them to take advantage of the keenest rates possible when their current deal comes to an end.”
For Guy Gittins, CEO of estate agents Foxtons, the Halifax House Price Index reflected his recent experience.
“Yes most definitely this mirrors what we are seeing,” he commented. “We have certainly seen buyer confidence returning to the market, with new buyer numbers being well up along with viewings. Our pipeline of agreed sales is sitting at the highest level since before the referendum in 2016. So certainly, very positive news and quite a positive outlook for what may lie ahead, assuming we might see another rate drop.”
READ MORE: Don’t cut rates too fast says Bank of England’s top economist
What’s boosted confidence in the market?
Tomer Aboody, director of specialist lender MT Finance, reasoned that while it was another strong month for the housing market and a further indication of growing confidence, it could also be seen as recovery due to the static, slow market in 2023, where prices and transactions were down.
"We are now seeing the fruits of a better economy and lower rates, with mortgage rates much more affordable than this time last year,” Aboody noted. "With the October budget looming, we hope that the trend continues but many fear what Rachel Reeves might bring.”
