According to the Office for National Statistics (ONS), UK house prices declined at the quickest rate in more than a decade in the year to October. As would be expected, London, the area with the highest house prices, experienced the greatest decline. The ONS data is being blamed on the higher cost of borrowing as interest rates have increased significantly over the past two years. Not only are home buyers facing affordability issues, but so are homeowners as well.

In the year to October, the average UK house price fell by 1.2%, which was greater than the expectation of a 0.6% decline. There has not been a larger drop since October 2011. Lower by £3,000 than the average was in October 2022, the UK average house price fell to £288,000.

The capital region recorded an average house price decline of 3.6%, which was the largest decline recorded for London since August 2009. The average London home still outpaced other regions, and for October was £515,500.

Unlike other house price indices, the ONS house price report includes cash purchases and is considered comprehensive in putting a lens on the UK housing market. However, the report is based on closed deals which could have been agreed upon earlier than the month of the report. So, it lacks the immediate insight offered by other house price index reports such as those provided by Halifax or Nationwide, which report on agreed deals for the reported month.

In November, both Halifax and Nationwide reported house price declines for November and expected further declines in their forecasts for 2024.

As stated earlier, interest rates have grown exponentially in the last two years. The Bank of England’s Monetary Policy Committee (MPC) voted this month to keep the rate steady at 5.25%. However, it was in December 2021 that the rate was almost zero at 0.1% and the MPC voted to increase the rate by more than double to 0.25%. It was the first increase in what would continue to occur for fourteen consecutive MPC meetings ending with the base rate being hiked.

At 5.25%, the standard base rate is at a 15 year high. 

Inflation reached double digits at the start of 2023 and is now closing out the year at 3.9%. It is closer to the Bank’s target rate of 2.0%. This gives hope that there might be cuts to the rate later next year.

The positive report on inflation nearing target could lower the perception of risk for lenders. While a competitive lending market has developed, more products with lower rates could begin showing up on the market. Some mortgages and fewer remortgages have come onto the market in the last few weeks that were offered below the 5.25%.

Of course, the rates available now are higher and more expensive than the pandemic impacted rates of two years ago, however there are savings to be found. 

Home buyers fighting elevated asking prices are shopping DIY homes due to the social media trend of investing personal time and work into a less costly home. Buyers are also reaching out to family as well as friends to gather their deposit funds. By choosing a home that might not be currently the home of their dreams, but will be their dream home later, and putting more of a deposit down buyers could save 

money.

Homeowners could avoid paying more than necessary in their repayments by shopping for a remortgage when their current term ends. Without a remortgage, the homeowner will be transitioned to their lender’s standard variable rate (SVR). A lower interest rate will normally be found with a remortgage, and the savings could be substantial. This is why as homeowners near the end of their term, experts suggest shopping for a remortgage sooner rather than later.

Since it is important to remortgage shop, it could be surprising to homeowners as to how easy it is to find a new deal. Remortgage shopping can be done quickly and easily online. Shopping on the site of a remortgage broker could put numerous quotes from a variety of lenders in hand in a matter of minutes. Exclusive deals could also be found with brokers. Homeowners also have the option to visit individual lender sites to gather quotes.

With quotes in hand, a homeowner could review and compare the offers to find the best remortgage for their unique needs.

Next year is on track to be less financially trying for households as inflation changes trickle down to be felt on a personal level. It might also be less costly for borrowers if lenders become more competitive or perhaps the MPC might cut the base rate. 

Meanwhile, home buyers and homeowners should do all they can to save money, for home buyers it might mean being creative and for homeowners it could simply be to shop for a remortgage. The good news is that there is hope on the horizon for a more financially stable and positive year ahead.