"The increased borrowing costs could dampen the momentum of house price rises, prompting potential buyers to rethink their plans in a tighter mortgage market."
- Rosie Hooper, chartered financial planner at Quilter Cheviot
Average house prices in the UK decreased by 1.4% in the 12 months to December 2023, up from a decrease of 2.3% in the 12 months to November, according to the latest UK House Price Industry from the Land Registry.
The average UK house price was £285,000 in December 2023, which is £4,000 lower than 12 months ago. Average house prices decreased by -2.1% in England and -2.5% in Wales, but increased by 3.3% in Scotland and 1.4% in Northern Ireland.
More positively, average prices increased by 0.1% between November and December, compared with a decrease of 0.8% during the same period 12 months ago.
Of English regions, annual house price inflation was highest in the North West, where prices increased by 1.2% in 2023. London was the English region with the lowest annual inflation, where prices decreased by 4.8%.
Rosie Hooper, chartered financial planner at Quilter Cheviot, commented: “The December 2023 government house price index shows a housing market that a couple of months ago was on course to rebound in 2024, but this now looks less clear amidst fluctuating mortgage rates seen this week.
“This update comes as mortgage rates have seen recent shifts, increasing after a period of welcomed decline. These changes are crucial for understanding the market's current mood, as the earlier decrease in rates offered a glimmer of hope to prospective buyers, fostering a competitive atmosphere among lenders despite broader economic pressures. These conditions have been illustrated by today’s increased index.
“The recent uptick in mortgage rates might signal a more cautious period ahead. The increased borrowing costs could dampen the momentum of house price rises, prompting potential buyers to rethink their plans in a tighter mortgage market. This adjustment could slightly cool a market that has otherwise demonstrated resilience in the face of significant economic challenges.
“The small mortgage rate increases of this week will take a while to feed through in the market and may end up being a flash in the pan. If so, the outlook for 2024 still carries a hint of optimism. The ongoing competition among lenders and serious lack of housing supply is likely to keep house prices buoyant and if and when interest rates are cut, it’s likely the property market will be off to the races again.
“For those facing the end of their long-term, fixed-rate deals, the current market underscores the value of professional mortgage advice as rates change so quickly that advisers can spot new deals and get prospective buyers and those remortgaging the best rates before they lock in.”
Emma Cox, MD of real estate at Shawbrook, added: “2023 ended with a downturn in property activity with challenging market conditions preventing buyers from making any major moves.
“2024 however is looking more positive with a reduction in mortgage rates fuelling activity at the start of the new year. Landlords should take note of the continuing trend among professional property investors in 2024, as they strategically diversify their portfolios to spread risk and shield themselves from challenging markets. This presents an opportune moment for professional investors to assess and review their portfolios and the potential benefits of diversification. We’re seeing a strong demand for commercial finance products.
“Despite market challenges, there remains an overall sense of optimism. The combination of falling mortgage interest rates and a buyers market is encouraging landlords to seize opportunities and expand their portfolios.”
