The UK housing market is already in a full-blown crash. Over a year, that’s a 2.3% increase despite last month seeing the average home price drop by 0.5% to £296,699. This fall represents the largest decrease since March 2022. It is an indicator of a market cooling after a wave of purchasers keen to complete their purchases before the new stamp duty changes came into effect.
House prices fall once more in August following back-to-back monthly decreases. This change is a world away from the record high of 431,000 that we experienced in January. As a result, many potential buyers were in a rush to close on their deals this month. They were keen to sidestep the looming stamp duty rises. New temporary stamp duty cuts Chancellor Rachel Reeves just announced the end of all temporary stamp duty cuts in England and Northern Ireland. The zero-tax threshold will be halved, from £250,000 to £125,000. First-time buyers in these areas will now pay stamp duty on homes above £300,000. This is a decrease from the old threshold of £425,000.
Despite this market pivot, mortgage rates are down marginally from last week. As of this writing, the typical five-year fixed mortgage rate sits at 5.17%. In the meantime, the average rate of a two-year fixed mortgage is a little higher, at 5.32%. The boost in residential mortgage products has been small—up from 6,936 to 6,945.
Usually, the spring and summer months trigger a surge in housing activity. Now, as the market continues to play catch-up with these new tax policies, analysts are reporting a new seriousness from buyers.
Karen Noye, a home mortgage specialist, worried that the new tariffs would contribute to a negative buyer attitude.
“The news of tariffs might start to spook would-be buyers as, once again, unpredictability seeps into the market.” – Karen Noye
Noye did acknowledge that persistent supply challenges are still propping up property prices and keeping them from plummeting. She cautioned that the market’s future trajectory will be informed primarily by the UK’s economic response. This pan-European response will be influenced by evolving policies from across the pond.
Given recent events, Nathan Emerson of Propertymark has not lost faith in the downward trend of house prices.
“Hopefully this month on month dip is only temporary.” – Nathan Emerson
Amanda Bryden pointed out that the surge in house prices observed in January was largely influenced by buyers’ urgency to meet the March stamp duty deadline.
“House prices rose in January as buyers rushed to beat the March stamp duty deadline,” – Amanda Bryden
The UK housing market is currently in a state of flux. Buyers and industry stakeholders alike need to stay aware of evolving economic indicators and policy developments that could affect market conditions. The recent adjustments in mortgage rates and product availability could play a crucial role in shaping buyer behavior in the coming months.