As you know, at Homesite, we like to keep you up to date with all the latest news. It is rising mortgages and the base rate that have been the grabbing the headlines over the last six months. So, after last month’s better than expected figures, the markets were watching very closely to see whether inflation was finally on the retreat.

 

The latest data has now been released and, it seems, last month was no one-off, as headline inflation has dropped once again, down from 7.9% to 6.8%. If the trend continues next month, it could mark a turning point for the UK’s economy. That would be especially good news for the housing market as continually rising mortgage costs and the uncertainty over how high they might go has steadily chipped away at both prices and buyer confidence. There are still likely to be one or two more rises to come (see finances) but the base rate should peak earlier and some way below the 6.5% that had been forecast.

 

Despite it all, house prices are continuing to prove remarkably resilient. Halifax, Nationwide and Rightmove are all reporting falls in July but only between 0.2% and 0.3% in what is normally a flat month.

As Kim Kinnaird, Director, Halifax Mortgages, says:

“In reality, prices are little changed over the last six months, with the typical property now costing £285,044, compared to £285,660 in February. The pace of annual decline also slowed to -2.4% in July, versus -2.6% in June. These figures add to the sense of a housing market which continues to display a degree of resilience in the face of tough economic headwinds.”

According to the main indices, the area most affected by the rising base rate is sales volumes. Nationwide reports, in June, that they were 10% below pre-pandemic levels (2019) and the most up-to-date figures, Rightmove’s, show, in July, sales volumes were down by 12%. At the same time, there was a shortage in the supply of new properties coming up for sale, whose numbers were also down by 12%, which helped support prices.

It’s the top two tiers of the housing market – second-stepper and the top-of-the-ladder homes – that saw the biggest falls in sales volumes – down 14% on 2019 levels.

Surprisingly, it’s first-time buyer sales that are holding up the best, with many searching for smaller homes in order to offset their higher borrowing costs. As a result, sales volumes in the FTB sector had the smallest falls at 9%.

Looking ahead, it may be a while before the new, more positive inflationary data has any discernible effect on sales and prices, especially as more hesitant buyers will want to see inflation falling for a third month before making a move. After that, how the market responds will depend on how quickly and how far mortgage rates fall. Most commentators, however, are not expecting mortgages to come down significantly over the next 18 months, so house prices are unlikely to go shooting up again, but they should at least stabilise, with sales volumes returning to more normal levels.

HOUSE PRICES AND STATISTICS

This month, the most recent indices all show a small monthly fall of between 0.2% and 0.3%. Annually there is a greater disparity – their figures ranging from +0.5% to -3.8%.

Nationwide: July: Avge. price £260,828. Monthly change -0.2%. Annual change -3.8%
Halifax: July. Avge. price £285,044. Monthly change -0.3%. Annual change -2.4%
Land Registry: June: Avge. price £287,546. Monthly change 0.7%. Annual change +1.7%
Zoopla: June: Avge. price £260,500. Annual change +0.6%
Rightmove: July: Avge. price £371,907. Monthly change -0.2%. Annual change +0.5% (asking prices on Rightmove)

 

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