House prices are on a downward trajectory – the average homeowner has seen thousands of pounds drop in the value of their property over the past year.
The latest August house price indices from major mortgage lenders Nationwide and Halifax showed property values had fallen substantially from their peak last summer, down 5.3 per cent and 4.6 per cent respectively. .
Official ONS/Land Registry figures based on sales prices still show the average house price rising slightly annually (up 1.9 per cent), but £5,000 below its peak in November of last year.
However, the ONS index lags behind reports from major mortgage lenders – the latest figures are for June and new data will be published tomorrow.
This might show that the average UK house price is falling annually, but what is most interesting to most people is not what a typical house theoretically does but what happens near it.
And if we dig deeper into the ONS data, the figures indicate that over the summer some areas were still experiencing increases of more than 15 per cent year on year. On the other hand, some locations were falling much more than average.
Big falls: Homeowners in some parts of the UK could have seen thousands of pounds knocked off their home price.
Bucking the trend: Some areas of the UK have seen double-digit house price growth last year, ONS figures show
Housing price micromarkets
Property prices do not move in unison. The UK is made up of thousands of independent micro markets, and what’s happening in one local area can be completely different to another area just a few miles away.
Thanks to data shared exclusively with This is Money by estate agency Hamptons, we can now reveal the local authorities that have experienced the biggest year-on-year price falls, according to official ONS figures.
Leading the way are Kensington and Chelsea in London, where average sales prices have fallen 12.9 per cent in the 12 months to June, from £1.515m to £1.32bn.
Orkney is the next worst local authority for house price falls. Prices there have fallen 8.9 per cent, from £220,000 to £200,000.
Meanwhile, Aberdeen city has seen average prices fall by 5.6 per cent, falling from £145,000 to £137,000.
However, that area cannot be compared to the rest of the UK, as house prices are closely linked to the price of oil, as that industry is the area’s largest employer.
However, not all areas of the UK have seen prices fall over the past year, according to ONS data. In fact, some have seen prices skyrocket.
The City of London, which stretches from Temple to the Tower of London and from Chancery Lane to Liverpool Street, has seen prices rise by 19.1 per cent in the past year.
East Lothian in Scotland has seen asking prices rise by 15.4 per cent in the 12 months to June, while homeowners in West Oxfordshire have seen the value of their homes increase by an average of 10.1 per cent in last year, according to ONS data.
The huge difference means that while the average house price trend is downward, there are certain areas that can be considered outliers.
Why do all house price indices give different figures?
It is important to note that property data, whatever its source, is imperfect and does not necessarily provide a complete picture.
For example, the Nationwide House Price Index is based on the average property valuation of the typical Nationwide mortgage approved for new purchases, weighted by the last four years of transactions. The typical data set per month is approximately 12,000.
Similarly, the Halifax Index is based on the average property valuation of a typical mortgage approved by Lloyds Banking Group, weighted by transactions over the past three years. The typical data set is 15,000 mortgage customers per month.
This means that it is difficult to achieve an accurate picture of specific areas due to the small data sample size.
ONS and Land Registry data are based on the average sale price of the average property, weighted by the most recent calendar year of transactions. The typical data set per month is 100,000.
This arguably makes it the most comprehensive of all indexes. However, it again has limitations. No less important is the fact that real estate transactions typically take months to complete, meaning there can be a significant delay.
Aneisha Beveridge, head of research at Hamptons International, said: ‘Local UK house price data is not without its flaws.
‘The time between the sale agreement and its completion means that the ONS house price index does not necessarily reflect the prices being traded on the market today. Rather, it is a measure of sales agreed upon approximately three or four months earlier.
‘In addition, the infrequent nature of address changes may mean limited sample sizes in some areas of the country.
‘This problem can be intensified in prime locations such as central London, where not only are transactions few and far between, but the significant difference in price of certain homes can often skew figures and create volatility.
‘Having said all this, it is the most complete measure we have. And despite the delay and subsequent revisions, historical data provides an accurate representation of how values have changed.’
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, should explore their options as soon as possible.
This is Money’s best mortgage rate calculator, powered by L&C, which can show you offers that match the value of your mortgage and your property.
What happens if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to take action to lock in a rate.
Anyone with a fixed rate deal ending within the next six to nine months should look at how much it would cost to remortgage now and consider striking a new deal.
Most mortgage agreements allow fees to be added to the loan and then only charged when you take out. By doing this, borrowers can lock in a rate without paying expensive origination fees.
What happens if I am buying a house?
Those with agreed-upon home purchases should also try to lock in rates as early as possible, so they know exactly what their monthly payments will be.
Homebuyers should be careful not to overextend themselves and be prepared for the possibility that home prices may fall from their current high levels as higher mortgage rates limit people’s ability to borrow.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.
You can use our best mortgage rate calculator to show you deals that match your home value, mortgage size, term, and fixed rate needs.
However, be aware that rates can change quickly, so the advice is that if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .
> Check the best fixed rate mortgages that you can request
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