The latest Halifax House Price Index report points to a housing market that is barely moving – after a 0.5% decline in March April has delivered a fall of 0.1%.
Annual growth is now at only 0.4%, half the 0.8% recorded in March. This is a market that has stabilised but only at a low growth rate.
This should be good for affordability but rising inflation and financing costs are having an opposing effect.
Mortgage rates have been edging upwards as conflict in the Middle East has unsettled financial markets and threatened a hike in interest rates, and inflation is set to eat into purchasing power.
UPWARDS RATES
This puts potential house buyers in a bind. Do they look to buy now while house price growth remains low, and before interest rates potentially rise?
Low demand in the economy makes interest rates going upwards an unlikely scenario but one that cannot be ruled out.
Alternatively, do they hold their nerve, waiting for interest rates to fall but risking prices picking up pace again?
Regional divisions in the UK housing market remain evident. Markets in the lower-priced areas in the North, the Midlands, and Scotland continue to show relative resilience, supported by stronger affordability and reliable demand.
In contrast, London and much of the South East are seeing softer conditions.
LIMITED ACTIVITY
Higher values, combined with rising mortgage costs, are limiting activity, and price movements in these regions remain subdued.
In some areas of London prices are even declining, the capital as a whole held up by pockets of high demand.
Affordability remains stretched overall. And the cost of servicing a mortgage remains high compared with recent years, constraining purchasers’ confidence.
As a result, the UK housing market is relatively subdued, with house buyers remaining cautious and price-sensitive.
The outlook for the coming year points to modest growth of 1% to 3%. However, this depends heavily on the path of interest rates.
If mortgage rates remain elevated, the market is likely to stay subdued.
Any sustained increase in rates would place further pressure on house buyer activity and pricing.
The central question is whether the housing market can maintain even this modest level of stability amid rising uncertainty and higher borrowing costs.
