The government data on the UK housing market revealed a slight increase in the annual average house price in August, but less than the increase of the annual average house price in July. According to the Office for National Statistics (ONS), there was only an increase of 0.2% for the annual average in August which took the house price to £310,000. The monthly increase from July to August was 0.3%.

The average house price in London is still helping keep the overall house price in the UK upward, despite a recorded decline. London house prices declined 1.4% annually to £536,000.

In the North East of England, the strongest annual growth was recorded at 3.6% to an average of £165,000. Following behind was Yorkshire and the Humber with recorded increases of 2.2% to £213,000. Wales recorded a 0.1% annual decline to a new average of £217,000. Northern Ireland experienced a 2.7% increase to £174,000 and in Scotland the annual average grew by 1.1% to £194,000.

The data from ONS also reported on first-time buyers. The average cost amounted to £242,000 for first-time buyers, which was an annual increase of 0.1% and a monthly increase of 0.4%. Home movers paid an average of £341,000, which was an increase of 0.3% both annually and monthly.

Experts see the slight growth as a good sign that the housing market will turn out to be resilient. Growth may be small, and there might be slight falls in some regions, but deep declines in the market are not expected. 

Higher interest rates have kept some homeowners out of the market, either due to affordability issues or confidence concerns. Some might be waiting until asking prices decline further or interest rates decline. Either would make the market more favorable, yet still less attractive than the market was when borrowing was historically cheap two years ago.

Lower demand in the market from hopeful home buyers is due to higher interest rates. The Bank of England’s Monetary Policy Committee (MPC) had increased the standard base interest rate for fourteen consecutive meetings starting on December 2021. In September, the MPC voted to keep the base rate steady as inflation had dropped from 6.8% to 6.7%. 

In October 2021, the base rate was at an historically low level of 0.1%. A year later in October 2022 the base rate had risen to 2.25%, and it now sits in October 2023 at 5.25%. Inflation held steady at 6.7% this month and the stubbornness of the rate could cause the MPC to increase the rate again during the November meeting.

Another rate hike could be too much for buyers, even at a small percentage increase. While the housing market has slowed with the current rate offers, another could cause a more dramatic impact on affordability.

Affordability issues are also impacting homeowners. Those that secured their mortgage when interest rate offers were lower could find the higher current interest rates hard to absorb into their household budget. A fixed rate deal coming to an end will have their interest rate ending with their term and the homeowner paying higher rates.

Experts are concerned for both home buyers in the market and homeowners. Home buyers keep the housing market afloat, and first-time buyers keep it fluid. As first-time buyers come into the market and purchase starter homes, those looking to upgrade can sell and do so. The housing market is important to the economy, and while perhaps a correction to the record high asking prices is needed, for the market to remain resilient buyers must stay.

For homeowners, concern is affordability issues due to higher interest rates that could cause many to move into arrears. Rather than pay more than necessary at the end of their cheaper term, homeowners are encouraged to shop for a remortgage. Choosing a remortgage would likely offer a lower interest rate than what the homeowner would face if they allowed their lender to move them to their standard variable rate (SVR) which is the alternative to their choosing a remortgage.

Shopping for a new deal is quick and easy to do online. A remortgage broker website could offer numerous online quotes from a variety of lenders. Brokers often have exclusive deals not offered directly from lenders to borrowers which makes the choice to shop with them a smart strategy. Homeowners do have the option of going from website to website of remortgage lenders to gather remortgage quotes to review and compare.

The next meeting of the MPC will be Thursday, 2 November. If the rate does increase due to inflation remaining stubborn, it will be of the most importance for homeowners to consider shopping for a remortgage sooner rather than later if they have already been moved to their lender’s SVR or are approaching the end of their low interest rate fixed mortgage term.