UK House Prices Stall as Mortgage Rates Hit Three-Year High
UK house prices were flat in September as the average five-year fixed mortgage rate hit 6% for the first time in three years, Lloyds data shows.
Focused on business and markets coverage across the UK, Europe, and the United States. His writing has been featured in Business Insider and USA TODAY.
UK house prices went nowhere in September. The average home cost £298,441, according to the Lloyds index (formerly the Halifax HPI), effectively unchanged on both the previous month and a year earlier.
Below expectations
Economists polled by Reuters had expected a small gain: a median forecast of 0.1% on the month and 0.2% on the year. The flat reading follows a 0.3% fall in August, the first monthly decline in three years.
Rates are the driver
The Bank of England has held its base rate since December last year, but mortgage pricing has moved anyway. Most major banks and building societies have raised rates in recent weeks in response to the global bond selloff. On Monday the average five-year fixed deal reached 6% for the first time in three years.
That hits three groups at once: homeowners coming off fixed deals, buyers who need to borrow, and sellers hoping to hold their asking price.
Demand is thinning
Figures from mortgage network Stonebridge show the effect on activity. Applications for home purchases fell 18.2% in the third quarter compared with a year earlier, and first-time buyer applications dropped 18.6%. A rise in remortgaging softened the overall decline.
Lloyds struck a more upbeat note. Mortgages director Andrew Asaam said prices have held up despite higher rates, and that new buyer enquiries are at their highest since February. He expects any price movement from here to stay modest.
A wider squeeze
Housing is one part of a broader pressure on households. Energy bills have risen on the back of the Iran war, and price increases elsewhere are prompting talk of a renewed cost of living crisis.
Policy risk adds to it. Knight Frank's Tom Bill said this month's budget is compounding the uncertainty, with buyers and sellers unsure which of the circulating tax rumours will materialise.
The bottom line
Prices are holding, but volumes are not. With five-year fixes at 6%, a budget weeks away and energy costs climbing, the market looks set to stay flat at best through the end of the year.