Halifax: UK house price growth weakest in more than three years

The average house in UK is now priced at £287,880, according to Halifax House Price Index

A sign outside a house in London. UK house price growth has fallen consistently since hitting a peak of 12.5 per cent in June last year. EPA

The average house price in the UK grew at just 0.8 per cent in March, the weakest figure in nearly three and a half years, according to the Halifax.

On an annual basis, house prices were 1.6 per cent higher than a year ago, compared with 2.1 per cent in February. The growth in house prices has fallen consistently since hitting a peak of 12.5 per cent in June last year.

The average house in the UK is now priced at £287,880, according to the Halifax House Price Index.

“However, overall these latest figures continue to suggest relative stability in the housing market at the start of 2023 and align with many other recent industry surveys and data,” said Kim Kinnaird, Director at Halifax Mortgages.

“This has been characterised by a partial recovery in activity and transactions, especially when compared to the significant drops seen at the end of last year, with latest Bank of England data showing mortgage approvals rising for the first time in six months.”

Ms Kinnaird said the main reason for the relative stability was an “improvement in mortgage rates”.

“It’s also important to recognise that the labour market, a key indicator for house prices, remains strong, with unemployment at a historical low of 3.7 per cent, and pay growth continues to look robust,” she added.

Slowdown

Analysts felt that even though the BoE has increased interest rates 11 times since December 2021, mortgage lending rates are now stabilising, having a received a shock last October from the mini-Budget of the then Truss government.

“The good news, however, is that despite the Bank of England increasing interest rates by 25 basis points (0.25 per cent) to 4.25 per cent last month, average rates on two and five-year fixed-rate mortgages have dropped significantly from their October highs, with major lenders continuing to slash rates over the past week,” said Alice Haine, Personal Finance Analyst at Bestinvest.

“The challenge from here is whether the full drag on house buying activity from the cycle of rate rises is yet to be fully felt and whether the recent concerns for the global banking system cause banks to tighten their lending criteria.”

Ms Kinnaird said mortgage rates were unlikely to improve much further any time soon, which will affect any changes to future affordability.

“While the path for interest rates is uncertain, mortgage costs are unlikely to get significantly cheaper in the short-term and the performance of the housing market will continue to reflect these new norms of higher borrowing costs and lower demand,” she said.

“Therefore, we still expect to see a continued slowdown through this year.”

Tom Bill, head of UK residential research at estate agent Knight Frank, said he expected prices to fall by a few per cent this year as “the transition to the new normal for borrowing costs” took place.

“Prices are broadly in a holding pattern but will be tested this spring as supply rises and higher mortgage rates cause a sharp intake of breath among a growing number of buyers and homeowners.”

Halifax's latest findings contrast with a separate house price index released by the Nationwide Building Society last week.

According to Nationwide's calculations, house prices fell by 0.8 per cent month-on-month in March, marking the seventh monthly fall in a row.

Halifax's figures are based on mortgage approval data, reflecting prices agreed to between buyers and sellers before the completion of sales. Its data includes mortgage customers from Halifax, Lloyds Bank and Bank of Scotland.