"Despite the affordability challenge, market activity has been improving. The number of new mortgages agreed recently reached its highest level in two years. "
- Amanda Bryden, head of mortgages at Halifax
House prices increased by 0.2% in October, the fourth consecutive monthly increase, pushing the average house price to a new record high, according to the latest Halifax house price index.
Although annual price growth eased to 3.9% from 4.6% in September, the typical property now costs £293,999, surpassing the previous peak set in June 2022.
On a regional basis, Northern Ireland continues to record the strongest property price growth of any nation or region in the UK, rising by 10.2% on an annual basis in October.
House prices in Wales also recorded strong growth, up 5.6% compared to the previous year, while Scotland saw a more modest rise of 1.9%.
The North West remains the region of England with the strongest growth, up by 5.9% over the last year, while growth in London came in at 3.5%.
Amanda Bryden, head of mortgages at Halifax, said: “That house prices have reached these heights again in the current economic climate may come as a surprise to many, but perhaps more noteworthy is that they didn’t fall very far in the first place. Despite the headwind of higher interest rates, house prices have mostly levelled off over the past two and a half years, recording a 0.2% increase overall. That’s a significant slowdown compared to the 21% rise we saw in the equivalent period from January 2020 to the summer of 2022.
“Despite the affordability challenge, market activity has been improving. The number of new mortgages agreed recently reached its highest level in two years. This aligns with average mortgage rates dropping steadily since spring - now over 160 basis points lower than in summer 2023 – coupled with continued positive income growth.
“Looking ahead, borrowing constraints remain a challenge for many buyers. Following the Budget, markets expect the Bank of England to cut rates more slowly than previously anticipated, which could keep mortgage costs higher for longer. New policies like higher stamp duty for second home buyers and a return to previous thresholds for first-time buyers might also affect demand.
“While we expect house prices to keep growing, it will likely be at a modest pace for the rest of this year and into next.”
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “Another rise in house prices shows that the market is proving resilient and stable despite lingering affordability concerns.
“We are now seeing record-busting house prices again, with the average cost of a property surpassing the levels recorded in June 2022. But unlike the post-pandemic market, conditions for buyers and sellers are not the same.
“Our members are reporting healthy levels of housing supply, meaning that although prices are reaching a new peak, they are still being kept in check and not forcing people to shelve dreams of homeownership.
“Some lenders are already prioritising new business with competitive rates. We may see offers retreat from the market in the coming weeks as lenders adjust their rates upwards following the Autumn Budget.
“Interest rates are expected to slowly creep down to around 4% in the next year, with the next decision taking place this afternoon.
“The OBR is forecasting that inflation rates will hold steady and hover around the Bank of England’s 2% target for the next five years, but political and economic turbulence can always put a bump in the road.
“If we do see interest rates drop today or at the end of the year, we can expect this to have a profound effect on demand, with better mortgage deals being offered to potential buyers.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, added: "October's rise in house prices fuels optimism for a strong finish to 2024 in the property market.
“Despite recent uncertainties caused by the Budget, the housing market has held strong, bolstered by encouraging economic indicators.
“Investors still anticipate an interest rate cut at today’s Bank of England meeting — which could provide further momentum. Experts also predict that inflation will hover near the government's 2% target until 2029.
"The full impact of the Autumn Budget on long-term interest rates may take time to unfold, but a rate cut in November would likely boost consumer confidence.
"In the meantime, market activity has continued to gain traction, with mortgage approvals rising for the fourth consecutive month in September to reach their highest levels since August 2022.
"We are currently in a buyer's market, with housing supply at its highest point since 2014 and a 12% increase in available properties year-on-year. This expanded inventory, alongside affordability concerns, means sellers must stay competitive, as offers generally fall below asking prices.
"Following last week’s Autumn Budget, the market outlook remains broadly optimistic, despite adjustments like the increased stamp duty surcharge on second homes and buy-to-let properties, which rose from 3% to 5%.
"However, the government’s £5 billion commitment to housing development underscores a long-term vision for a healthier market, likely supporting steady growth as we move forward."
