UK house prices rise for third straight month

House prices are back to within a whisker of their record highs having risen for a third straight month in September.
Prices rose 0.3 per cent last month, according to the latest data from Halifax, one of the country’s largest mortgage lenders, matching the increase in August.
Over the past 12 months, Halifax estimates that house prices have gone up by 4.7 per cent, the strongest rate of annual inflation since November 2022.
The average value of a UK home currently stands at £293,399, barely £100 shy of the record set in June 2022, shortly before the housing market was derailed by Liz Truss and Kwasi Kwarteng’s mini-budget.
“It’s essential to view these recent gains in context,” Amanda Bryden, head of mortgages at Halifax, said. “While the typical property value has risen by around £13,000 over the past year, this increase is largely a recovery of the ground lost over the previous 12 months. Looking back two years, prices have increased by just 0.4 per cent.”
House prices rose sharply following the ending of the first lockdown as would-be buyers, having spent weeks on end confined to their homes, sought to use their pandemic savings to move into bigger houses with larger gardens. The trend was dubbed the “race for space”.
However, the market came to a halt almost immediately after the mini-budget at the end of September 2022, after Truss and Kwarteng spooked financial markets and sent borrowing costs soaring. Subsequent interest rate increases from the Bank of England made mortgages even more expensive.
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Now that rates are coming back down again, the cost-of-living crunch is easing and prices are climbing again, there has been ample evidence in recent months that would-be buyers are returning.
“Market conditions have steadily improved over the summer and into early autumn,” Bryden said. “Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40 per cent in the last year and now at their highest level since July 2022.”
There remains a north-south divide, Halifax’s data shows, with prices in the north having to catch up with prices further south.
In the northwest of England, house prices have increased 5.1 per cent over the past year and in Yorkshire by 4.3 per cent. By contrast, in eastern England, which includes commuter counties such as Hertfordshire and Essex, house prices are rising much more slowly, up 2.3 per cent compared with 12 months ago.
In London, the most expensive region in which to buy a house, prices are up 2.6 per cent year-on-year to an average of £539,238, still comfortably below the peak of £552,592 set in summer 2022.
Across the UK, Northern Ireland remains the place where prices are rising the fastest, having increased 9.7 per cent over the past year. In Scotland, year-on-year price inflation is running at 2.1 per cent.
Although affordability is improving with mortgage rates retreating, Bryden said it “remains a challenge for many”. As a consequence, she expects any further increase in house prices over the next 18 months or so to be “modest”.
Ashley Webb, a UK economist at Capital Economics, is more bullish given his belief that interest rates will come down quicker than expected next year. “Our view that the Bank of England will cut interest rates by more than most expect may mean house prices grow by an above-consensus 5 per cent in 2025,” he said.