The UK housing market is showing signs of recovery, with recent figures indicating an upswing in house prices and mortgage approvals. According to new data from Nationwide Building Society and the Bank of England, the housing market is experiencing its strongest growth in two years, and many experts are optimistic about continued improvements in 2025.
House Price Growth at a Two-Year High
Nationwide Building Society reported that UK house prices grew by 0.7% in September, bringing the annual growth rate to 3.2%. This marks the fastest pace of growth since November 2022. Property values are now just 2% below the all-time highs seen in the summer of 2022, signalling a steady recovery. Economists believe that factors such as lower inflation, increasing household incomes, and easing mortgage rates have contributed to this resurgence.
The average house price in the UK now stands at £266,094, a slight increase compared to earlier this year. Robert Gardner, chief economist at Nationwide, noted that income growth has recently outpaced house price increases, while borrowing costs have started to fall. These factors have helped improve affordability for buyers, though both activity and prices remain lower than historical norms.
Mortgage Approvals Also on the Rise
Alongside house price growth, mortgage approvals have also picked up. The Bank of England’s latest report showed that 64,900 loans were approved for home purchases in August, up from 62,500 in July. This is the highest level of approvals seen in two years, further indicating a recovery in the housing market.
Experts attribute the rise in approvals to improved mortgage rates and stabilising living costs. Lenders are increasingly offering more competitive mortgage deals as interest rates have started to ease. Five-year fixed rates have dropped below 3.7%, the lowest since the start of the year, and this has helped to increase buyer confidence.
What’s Driving the Revival?
Several factors are contributing to the revival of the housing market. Lower inflation and rising household incomes have given consumers more financial flexibility. As lenders anticipate further rate cuts by the Bank of England, mortgage costs have become more manageable, providing potential buyers with greater purchasing power. Additionally, consumer confidence has been bolstered by the stabilisation of the broader economy, which is encouraging more people to enter the housing market.
According to Thomas Pugh, economist at RSM UK, these trends suggest that the housing market will continue to improve throughout the rest of 2024 and into 2025. Pugh expects house prices to rise between 4% and 5% by the end of this year, with strong gains in disposable household incomes driving demand for property.
Regional Variations in Price Growth
While the housing market is reviving across the UK, there are significant regional variations in price growth. Northern Ireland saw the highest growth, with house prices rising by 8.6% over the last three months, while the North West of England also experienced strong growth at 5%. In contrast, areas such as London and the West Midlands saw more modest increases of 2% and 1% respectively.
This regional disparity is largely driven by affordability. More affordable regions have seen a higher demand for properties as buyers seek out areas where their money can go further.
What Does the Future Hold?
As the UK housing market continues its recovery, the outlook for the coming months remains positive. With mortgage rates stabilising and household incomes rising, more buyers are expected to enter the market. However, there may still be some uncertainty as we approach the next Bank of England announcement on interest rates and the upcoming Budget.
Some experts, such as Jonathan Hopper of Garrington Property Finders, note that while house prices are rising, they are increasing more rapidly in affordable areas. There is also speculation that potential buyers may hold off on making purchases until after the Budget and further rate announcements, as they assess the impact of any new policies on their purchasing decisions.
In summary, the UK housing market is showing signs of revival, with both house prices and mortgage approvals on the rise. As economic conditions continue to improve, the market is likely to see steady growth into 2025, providing opportunities for buyers and investors alike.
If you’d like to discuss your mortgage options, please get in touch
Comments