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House prices soared between July and August, according to the latest figures from the Office for National Statistics.
The average house value increased by 1.5 per cent month-on-month from £288,533 in July to £292,924 in August, representing the second highest monthly increase in the last two years.
It is the sixth consecutive month that home values have risen and means annual property inflation stands at 2.8 per cent.
The figure also marks a clear distance from the previous peak, reached in late summer 2022, when prices hovered around £288,500 for a few months, before falling to £277,782 in March 2023.
On a roll: Latest ONS figures show consecutive house price increases in the last six months, since March 2024
House prices are rising at different levels in Britain and also depend largely on the type of property.
Much of the growth is being driven by new construction prices, which are selling for 25.6 percent more than this time last year.
However, the ONS warned that the number of transactions had been lower than usual, which could have skewed the results. He also noted there was “substantially greater uncertainty” around new construction prices.
Meanwhile, median house prices among used and resold properties only increased 0.5 percent in August and 1.3 percent annually.
At the regional level, price increases also differ greatly.
In England, housing stock has increased by 2.3 percent compared to last year; In Wales, there has been a 3.5 per cent increase; in Scotland, an annual increase of 5.4 per cent and in Northern Ireland, house values have increased by 6.4 per cent.
Within England, the north west has seen the biggest increases in house prices, up 4.6 per cent in the last 12 months.
However, the southwest has seen little change, with prices rising 0.8 percent since August 2023.
Why are house prices rising?
The cause is said to be greater political certainty and lower mortgage rates, according to Emily Williams, research director at Savills.
“The market has been buoyed over the summer by lower mortgage costs and increased certainty following the general election,” Williams said.
‘The latest mortgage data from the Bank of England showed that monthly mortgage approvals have risen to their highest levels since the 2023 mini-budget.
“Still, there is the ability to unlock more demand, particularly from moving companies, as rates continue to decline.”
The ONS figures are widely regarded as the most comprehensive and accurate house price index. This is because this report produced by the UK’s official statisticians uses data from the Land Registry and is based on average sales prices. However, this also means that your data lags behind other indexes.
Jonathan Hopper, chief executive of Garrington Property Finders, says the market has since cooled somewhat.
‘The property market enjoyed a strong start Starmer. But budget uncertainty means the last few weeks have looked more like a Reeves retreat.
“While today’s official data reveals that the housing market was heating up quite a bit in August, things have since cooled down,” Hopper said. “While these numbers are impressive and welcome, they may be more of a blip than a boom.”
He added: ‘In recent weeks, price growth has returned to neutrality in many areas. A flood of sellers putting their home on the market means that many buyers are left with many options to choose from and can negotiate hard on the price they pay.
‘The slowdown in activity is most acute at the top end of the market, where many sales are discretionary.
“Wealthy buyers have been spooked by reports of painful tax increases to be included in this month’s budget, and some would-be sellers have gone into early winter hibernation and decided to postpone putting their home on the market until spring”.
Mortgage rates will rise again
It’s true that mortgage rates had been falling at a considerable rate since the summer.
Between early July and the end of last week, the cheapest five-year fixed-rate mortgage available fell from 4.28 percent to 3.68 percent.
Meanwhile, the two-year lowest fix fell from 4.68 percent to 3.84 percent during that time.
However, they are now rising again with the five-year low at 3.79 percent and the two-year low at 3.9 percent.
NatWest has said it is raising mortgage rates, following what Santander and TSB did earlier in the week.
Rate rise: NatWest is the latest mortgage lender to change its tune and increase rates after months of cuts
More lenders are expected to raise rates in the coming weeks because Sonia swap rates (an interbank lending rate) have been rising in recent weeks.
When Sonia swaps rise high enough, it often results in fixed mortgage rates rising, and vice versa when they fall.
Currently, brokers argue that there is little or no room for lenders to make money, which is why some are having to reprice their deals higher.
Chris Sykes, technical manager at mortgage broker Private Finance, said: “As for residential rates, we have started to see lenders increase their fixed rates and we expect this to continue as they are likely to be priced below swap rates. of Sonia at this moment.
‘The level of rate increases has varied wildly depending on the lender, ranging from 0.1 to 0.3 per cent to significantly more.
“These larger rate rises are mainly coming from lenders who feel that they are too competitive for the specialization they offer, or that their business volumes are too high and they want to reduce demand.”
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