Expert details reasons behind house price rise in February
The latest house price index from Halifax showed a small 1.1% increase in house prices in February, putting it somewhat out of line with other datasets which tended to show a slight downturn in prices.
Halifax largely attributed this increase to recent reductions in mortgage rates, improving consumer confidence and continued resilience in the labour market.
However, Karen Noye (pictured), mortgage expert at Quilter, said this increase may well be short lived due to inflation being significantly above the government’s 2% target.
Rising house prices
“This uptick in house prices reported by Halifax was most likely driven by the fall in mortgage rates in comparison to the peak seen towards the end of last year,” Noye said.
She believes the dip in mortgage rates likely boosted buyer confidence compared to the month prior, resulting in the rise in house prices.
“However, I believe this boost will potentially be short-lived given inflation is still running high,” Noye said.
Annual inflation in the UK in fact rose to 10.4% in February 2023, up from the 10.1% recorded in January.
Noye added that, in part, due to the surprise increase in inflation, the Bank of England opted for a further 25bps base rate increase during the latest Monetary Policy Committee meeting, and she believes the central bank has shown little signs of curbing further rate hikes if inflation remains sticky.
Market expectations
As it stands, Noye said the market remains extremely unpredictable, and she believes this will be concerning for homeowners who may be looking to sell their properties.
“Recent data from the Bank of England showed mortgage lending is down considerably, and with affordability being impacted by interest rate increases and the rising cost-of-living, for some moving to a new home, or taking their first step on to the property ladder, their purchase plans will be pushed even further out of reach,” she said.
Noye believes that any further house price growth throughout the year is looking increasingly unlikely. She said that if homeowners begin struggling to keep up with rising mortgage payments and energy bills, on top of the more general rise in the cost-of-living, there could potentially be a flood of properties coming on to the market. This, Noye said, could significantly shift the levels of supply and have a further downward impact on prices.
“What’s more, there are many borrowers who are currently on fixed rate mortgages that are due to finish this year, and the huge rise in monthly mortgage payments driven by current interest rate levels could come as a shock,” Noye said.
This could result in a negative impact on financial stability, and they may need to consider moving to a smaller home in order to save money if the pressure is too great.
Noye added that the usual strong Spring selling season is expected to be much more muted this year, and she believes it is unlikely that we will see any real strength in the market for some time as more people take on a ‘wait and see’ approach.
What do you believe pushed house prices to rise by 1.1% in February? Let us know in the comment section below.
