UK house prices increased for the third month in a row according to the latest report released by Halifax. Just short of the record high, the data for the month of September revealed confidence in the housing market and the economy as wage pay has increased and interest rates have declined. House prices increased by 0.3% last month to £293,399. This is only slightly below the peak high of £293,507 set in June 2022. September’s 0.3% increase mirrors the 0.3% increase of August. 

The annual increase recorded at a 4.7% increase, which is slightly above the August annual increase of 4.3%. It was the highest rate of growth since November 2022.

The reduction in the cost of borrowing is due to the optimism of lenders cutting their rate offers and creating a robust competitive lending market. The Bank of England’s Monetary Policy Committee (MPC) voted for the first reduction to the standard base interest rate in August. The cut of 0.25% took the sixteen-year high base rate from 5.25% to 5.0%. Lenders have taken their offers below the base rate and even below what another 0.25% cut to the rate would be and have extended their offerings to 4.0% and below. 

Some borrowers have chosen to take advantage of the current rates rather than wait out for lower ones, having experienced the deep cuts earlier in the year. Lenders had hoped for the first base rate cut in early spring and preparing early for the outcome reduced their rates dramatically. Mortgages fell close to 4.0% before the MPC voted repeatedly to hold the rate steady as inflation remained stubborn and above the target rate of 2.0%. As quickly as rates dropped, they climbed and borrowers that waited ended up waiting longer than expected. The early spring cut to the base rate did not happen till August.

Another rate cut is forecasted, but in September the rate was voted to hold steady at 5.0%. Without a meeting of the MPC in October, the last two months of the year are the final opportunities for another reduction to the base rate for 2024.

Many hopeful home buyers have chosen to take advantage of what is currently available from lenders and the housing market growth reveals the enthusiasm for climbing onto the property ladder.

Lower lending rates have not only motivated home buyers, for homeowners seeking lower rate remortgages have also decided to save money and choose a low-interest rate deal before the opportunity is missed. Even with an expected second rate cut to be voted for by the MPC, the timing is unknown, and should the committee choose to hold the rate steady, lenders might grow cautious as they did earlier in the year. 

Lenders might allow their best low-rate deals to rest on the market for borrowers, but it is advised by experts to consider offers available now rather than wait out for much lower rates. The return to the historical low interest rates of the pandemic is not likely. It could be a smart strategy to consider that perhaps, the best rates of 2024 are here and available now.

The growing house prices could have an impact on property values, this is good news for homeowners seeking a remortgage as their loan to value or LTV ratio could be lower than expected and qualify them for better low-interest rate remortgage offers.

The attention being shown by hopeful home buyers, including first time buyers, is likely to remain as the expectation of lower interest rates brings buyers, and the influx of buyers motivates sellers to bring more properties to the market. However, the growing average house price concerns experts as to how long it will be before first-time buyers and home movers are shut out of the market. 

Amanda Bryden, head of mortgages with Halifax, remarked, “Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates.

“This has boosted confidence among potential buyers, with the number of mortgages agreed up more than 40% in the last year and now at their highest level since July 2022.”

She added, “While improved mortgage affordability should continue to support buyer activity, boosted by anticipated further cuts to interest rates, housing costs remain a challenge for many. As a result, we expect property price growth over the rest of this year and into next to remain modest.”