The UK housing market has witnessed its first decline in house prices since March, with a reported drop of 0.2% month-on-month in December, according to Halifax, Britain's largest mortgage lender. This decrease comes despite a backdrop of supportive factors including falling mortgage rates, rising wages, and anticipated changes to stamp duty policies that have encouraged home-buying activities.
Recent months have seen a resurgence in mortgage inquiries, pushing the demand for home loans to levels not seen since before the COVID-19 pandemic. The easing of price inflation and improvements in income growth have alleviated some financial pressures on consumers, making home ownership more accessible. The average price of a home, while experiencing a slight monthly decrease, rose by 3.3% compared to the same period last year. However, the annual rate of growth in house prices fell from 4.7% in November to 3.3% in December.
Despite the positive trends, challenges remain. The Bank of England's bank rate is expected to decrease at a slower pace than previously anticipated. This may hinder affordability for potential buyers who are already facing hurdles in securing mortgages. Amanda Bryden, head of mortgages at Halifax, noted the delicate balance within the market:
“However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year.”
The government's plan to raise the threshold on stamp duty charges in England and Northern Ireland, set to take effect in March, is expected to incentivize first-time buyers. This policy change aims to stimulate demand further as prospective buyers rush to secure properties before the new regulations come into play.
Bryden added that in various regions across the UK, house prices have remained buoyant due to demand exceeding supply. She suggested that this imbalance might be exacerbated by homeowners delaying the sale of their properties in hopes of lower future mortgage rates:
“In many areas across the country, house prices were also buoyed by demand outstripping supply, possibly further amplified by homeowners holding off putting their property on the market – perhaps in anticipation of mortgage rates reducing further.”
As the market adjusts to these shifts, it remains to be seen how these factors will influence housing prices and buyer behavior in the coming months.