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Highlights:
- UK house prices rose for the third consecutive month in September, up 0.3%, nearing record highs.
- Mortgage affordability has improved, with the number of mortgages agreed up 40% year-on-year, driven by strong wage growth and lower interest rates.
- Despite the gains, future property price growth is expected to remain modest due to ongoing affordability challenges.
UK house prices rose for the third consecutive month in September, inching closer to record highs as falling mortgage rates and strong wage growth bolstered buyer confidence, according to figures released by Halifax. The 0.3% increase in house prices matches the monthly rise seen in August, with the average price of a home now standing at £293,399, just shy of the all-time high of £293,507 set in June 2022.
On a yearly basis, house prices were up 4.7% in September, compared to a 4.3% increase in August, marking the strongest rate of annual growth since November 2022. However, analysts caution that these gains largely reflect a recovery from losses in the previous 12 months.
Contextual Gains Amid Modest Market Recovery
Amanda Bryden, Head of Mortgages at Halifax, highlighted the need to view these gains in context. While house prices have risen by around £13,000 over the past year, much of this growth merely recovers ground lost during the preceding 12 months. When looking at a two-year period, house prices have increased by a modest 0.4%, or £1,202, Bryden noted.
Market conditions have improved steadily over the summer and early autumn, with falling interest rates and strong wage growth contributing to greater affordability for potential buyers. Mortgage affordability, in particular, has been a driving factor, with the number of mortgages agreed up by over 40% compared to the previous year. This represents the highest level of mortgage agreements since July 2022.
Future Growth Expected to Be Modest
Despite the positive momentum, Bryden cautioned that housing costs continue to pose challenges for many buyers. While mortgage affordability is expected to improve further, supported by potential cuts in interest rates, the growth in property prices is anticipated to remain modest for the rest of the year and into 2025. This restrained growth outlook reflects ongoing economic uncertainties and the persistent affordability issues faced by many households.
