House prices continued to rise in August, Halifax says, but experts warn of a recession

UK house prices rose in the year to August after a dip in July, according to Halifax.

However, on a monthly basis, house price inflation slowed to 11.5 percent, down from 11.8 percent in July.

The average UK house now costs a record £294,260 according to the bank’s latest House Price Index.

However, the annual growth rate for the year to August 2022 slowed to its lowest point in three months. During the quarter, house prices increased 2.6 percent.

Slowdown: UK house price growth has started to slow but buyer demand continues to prop up the market

Kim Kinnaird, Director of Halifax Mortgages, said: “While house prices have so far proven resilient in the face of growing economic uncertainty, industry surveys point to cooling expectations in most regions of the UK, as demand from buyers and other futures declines.” The indicators they are looking for also imply a probable slowdown in market activity.

‘First, there is the considerable impact on people’s incomes due to the reduction in the cost of living.

“The 80 percent increase in the energy price cap for October will put further pressure on household finances, as will additional increases expected in January and April.

“At forecast levels, this is likely to limit the amounts potential homebuyers can afford to borrow, in addition to the adverse impact of higher energy prices on the broader economy.”

Even if the government steps in to cut energy bills, Kinnaird said borrowing costs will continue to rise as the Bank of England is expected to raise the base rate further, hitting house prices.

“However, this must be seen in the context of the exceptional growth seen in recent years, with house prices averaging over £30,000 in the last 12 months alone,” he added.

House prices in the UK increased by 2.6% in the last three months and by 11.5% in the last 12

House prices in the UK increased by 2.6% in the last three months and by 11.5% in the last 12

Welsh houses add £31k in a year

Regionally, Wales experienced the strongest annual growth in the UK, with house prices rising by 16.1%, adding an additional £31,246 to prices over the past year. The average property now costs £224,858.

In contrast, London continues to lag behind with growth of 8.8 per cent, adding £44,669 in the last 12 months to bring the average to a record £554,718.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “House prices have returned to normal after their small dip last month, but the growing signs that the market is calming down cannot be ignored.

“Demand is slowly declining in most of the country as skyrocketing inflation and rising interest rates begin to take a toll on consumers and the economy.

‘As we have seen in the past, there is still demand during periods of economic trouble, and around half of buyers have to move because their living situation changes. This demand is likely to keep prices high for the rest of the year.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘With markets betting on another rate hike this month, the drive for borrowers to move quickly to secure a competitive deal continues.

‘Lenders have money to lend and are willing to lend, although volume management is the name of the game.

“There are still good deals, though rising energy bills are affecting affordability calculations and lenders are expanding their policy for higher-income households accordingly.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, added: “August, absurd as it sounds, was off the charts, with first-time buyers leading the way. The volume of inquiries and calls we receive remains at record levels, which is beginning to seem a bit strange given the cost of living crisis and rising interest rates. It should be getting calmer, but we are seeing the opposite.

With two years of skyrocketing house price growth, it’s as if the housing market has been decoupled from the economic train and is now rolling freely down the tracks without brakes. Let’s hope for a gradual slowdown instead of hitting the barriers. The fact that we are now seeing loans to major borrowers rise more than 5 percent may well start to cause demand to fall slightly and result in a cooldown rather than a collapse.

The best mortgage rates and how to find them

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