Housing market ‘is reviving’ amid growth in house prices and mortgage approvals

The housing market is reviving and the more positive outlook will continue in the months ahead, some finance experts have suggested, following the release of new figures indicating a pick-up.

Nationwide Building Society reported on Monday that annual house price growth accelerated in September to the fastest rate seen in around two years.

The Society said that property values are sitting just 2% below the all-time highs recorded in summer 2022.

UK house prices increased by 0.7% in September.

This resulted in the annual price growth rate accelerating from 2.4% in August to 3.2% in September, the fastest pace since November 2022 when there was a 4.4% rise, according to Nationwide.

The Bank of England’s Money and Credit report, also released on Monday, showed that the number of mortgage approvals made to home buyers jumped to a two-year high in August.

Some 64,900 loans for house purchase got the green light, up from 62,500 in July.

Improving mortgage rates, the easing off of rises in some other living costs and stronger household incomes were among the factors cited by some experts as helping to support the housing market.

Thomas Pugh, an economist at audit, tax and consulting firm RSM UK, said: “The combination of the 3.2% (year-on-year) increase in the Nationwide house price index in September, the fastest rate in two years, and another rise in mortgage approvals to 64,900 in August, also the highest level in two years, reinforces our view that the housing market is reviving, and will continue to improve over the next year, and into 2025.

“Indeed, all the factors which are contributing to the broader economic recovery are also positive for the housing market.

“Lower inflation, higher household incomes, lower interest rates and, until recently at least, recovering consumer confidence will all help to drive housing transactions and prices higher.

“As lenders are pricing in more rate cuts by the Bank of England, the best-buy five-year fixed rates have slipped below 3.7% for the first time since the start of the year.

“And with house prices still about 2% below the record highs seen in the summer of 2022, there is plenty of room for catch up growth.

“We’re expecting price rises of between 4% and 5% by the end of the year.”

Mr Pugh said, overall: “We expect strong rises in households’ real disposable incomes and increasing consumer confidence to feed through into stronger domestic demand and economic growth as we move through the second half of the year and into 2025.”

The average UK house price in September is £266,094, according to Nationwide’s figures.

Robert Gardner, Nationwide’s chief economist, said: “Average prices are now around 2% below the all-time highs recorded in summer 2022.

“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.

“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”

Sarah Coles, head of personal finance, Hargreaves Lansdown said: “These aren’t runaway price rises, but they’re firmly positive, which always helps boost buyer sentiment and keep the wheels rolling on the property bandwagon.”

Guy Gittins, chief executive of estate agent Foxtons said: “We’re already seeing more inquiries made, more offers submitted and more sales agreed, all of which bodes very well for the remainder of the year and beyond.”

Jeremy Leaf, a north London estate agent said: “The market has changed and demand is improving which has coincided with lower mortgage rates and a more settled picture for inflation and politics.

“This shift has resulted in more appraisals, listings, offers and firming pricing.”

Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Although we are still at the very start of the journey regarding base rates, we are starting to see lenders introduce improved competitive offerings when it comes to mortgage deals.”

Holly Tomlinson, a financial planner at wealth manager Quilter said: “Lenders are competing to attract custom, and a more stable environment is likely to mean they go further with rate cuts.”

Some experts suggested that the looming Budget and expectations of possible further rate cuts could lead some potential home movers to pause for thought.

Matt Thompson, head of sales at estate agent Chestertons, said: “We expect September’s level of market activity to continue in October but sellers will review their position following the autumn Budget whilst some buyers await the next Bank of England announcement on interest rates in November.”

Jonathan Hopper, chief executive of Garrington Property Finders, said: “Prices are rising fastest in more affordable locations and there’s a clear North-South divide.

Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “Improving mortgage rates and strong income growth have eased the affordability challenge for some buyers in recent months, with the Bank of England’s interest rate cut at the start of August and prospect of at least one more rate reduction to come this year energising the residential property market.”

But she added: “Borrowing costs remain relatively high when compared to two years ago and who gains and who loses out depends on the type of mortgage someone has and what stage of the home ownership journey they have reached.”

A survey for online budgeting tool IE Hub, released on Monday, indicated that nearly a third of mortgage holders (31%) are still worried about interest rates rising, despite the Bank of England base rate recently being cut from 5.25% to 5%.

A fifth (20%) of homeowners surveyed said their mortgage is significantly more than it used to be.

Nearly a quarter (24%) said they will move mortgages when their current deal ends to try and reduce the costs and 16% have been looking into ways of managing paying their new rates.

Here are average prices in the three months to September and the annual change, according to Nationwide Building Society:

Northern Ireland, £196,197, 8.6%

North West, £215,807, 5.0%

Scotland, £184,471, 4.3%

Yorkshire and the Humber, £206,493, 4.3%

North East, £161,066, 3.2%

Wales, £207,113, 2.5%

London, £524,685, 2.0%

Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £424,345, 1.9%

East Midlands, £232,390, 1.8%

West Midlands, £243,599, 1.0%

South West, £303,522, 0.6%

Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £336,253, 0.6%

East Anglia, £270,906, minus 0.8%

Published: 30/09/2024 by Radio NewsHub