Experts had predicted that the UK housing market would lose traction and begin to decline, but resilience has remained. This is good in some ways and will be a letdown in others. Of course, those that have been shut out of the housing market due to affordability are likely hoping for house prices to drop. It is the only way they can reach the property ladder now that rising interest rates have made borrowing more expensive than it has been in over a decade. For the economy, a strong housing market could keep a recession at bay, and for homeowners retaining property value would be important. 

Halifax reported house prices rose slightly in March. It should be noted that other property reports reported declines in the market. However, not only did Halifax report a resilient housing market but also an optimistic outlook.

Economists were pessimistic about March housing market data. A contraction of 0.3% was expected. Yet, Halifax reported 0.8% growth in the average house price.

The average house price was 1.6% higher than the average house price reported in March last year. Taking all things in context though, the data shows it was the weakest house price growth since October 2019. The housing market had been expected to show declines due to the growing cost of borrowing.

The Bank of England’s Monetary Policy Committee (MPC) has increased the standard base rate during each of the last eleven consecutive meetings since December 2021. Meaning that in little over a year, the rate has risen from 0.1% to 4.25%.

The Halifax report conflicted with the latest data from Nationwide, as their report revealed a 3.1% annual decline for March which is the sharpest decline since 2009. While the reports are important indicators of the state of the economy, they each represent the data from their own approved customers and not necessarily the entire housing market.

However, the difference in both reports is revealing of the current economic situation. Things are unsteady. There could be a recession, or we might have escaped one. The MPC is trying to make an impact on inflation and more interest rate hikes could occur. The housing market, which had been riding on an incredible boom, could crash downward if the interest rate hits the sweet spot of too high too soon, and supply in the market remains tight. Meanwhile, many households are suffering financially with higher interest rates and the impact of inflation.

As an indicator more representative of the housing market, the Bank of England’s data for February revealed a 37% decline year on year. 

The expectation representing the housing market is likely to be resilience, as it has surprised through Brexit, the pandemic, and now higher interest rates. However, affordability is also an issue that might become more prominent even if resilience remains with the housing market. Home buyers are finding it hard to save for deposits, afford the still high asking prices, and afford the more expensive interest rates.

Affordability will also be an issue with homeowners. Getting onto the property ladder during the height of the pandemic when the Bank’s standard base rate was historically low meant home buyers obtained cheap interest rates. When their mortgage term ends, they will be able to remortgage or be moved to their lender’s standard variable rate (SVR). Both of which will be attached to higher interest rates than they were used to paying, though the remortgage will likely be a lower interest rate.

A SVR could be double or more the rate of a remortgage. This is why experts encourage homeowners to shop for a remortgage rather than allow their lender to move them to a SVR. It is easy to do online. Visiting the website of a remortgage lender could offer a quote in a matter of minutes. Visiting the website of a remortgage broker could offer many quotes from a variety of lenders in which to review and compare to find the best remortgage.

The next meeting of the MPC will be in May, as there is not one scheduled for April. This leaves a few weeks before the base rate could possibly be increased for the twelfth consecutive meeting which means borrowing is cheaper than it could be soon. Whether it is a mortgage for a home, or a remortgage to save money from a SVR, borrowing now could be smart strategy since no one can fully predict what borrowing or the housing market will be in the near future.