The housing market in the UK is again showing how resilient it can be as house prices are increasing despite continued higher interest rates. Not only are interest rates higher than only two years ago, but the average asking price remains at a level straining home buyers as they try to get on the property ladder. First-time home buyers are especially impacted as they are finding it hard to buy with higher prices and higher borrowing costs as well as attempting to save for a deposit following a global pandemic and double-digit inflation. 

The latest data report from Rightmove reveals just how difficult it is to buy currently as the average house price grew to £372,324, which is just a few hundred pounds short of last year’s record high of £372,894 in May 2023. Annual growth was 1.7%, while month to month the increase was £4,207.

The released data reveals higher priced homes have contributed to the average house price.

Experts have warned that the boost is likely a short one, mainly due to the expectation the Bank of England’s Monetary Policy Committee (MPC) will be cutting the standard base interest rate later in summer rather than spring. It had been hoped inflation would be closer to the target rate set by the Bank of 2.0%, but at 3.2% there is still more taming of inflation needed. 

Also, the start of the spring season may have been helpful as it is a usual time for home buyers to shop as they emerge from the winter months and cold. In addition, recent competition in lending could have inspired buyers to show up in the housing market. 

The advice to sellers is to price their properties competitively and not expect continued strong demand in the market if interest rates do not decline soon.

Tim Bannister, a director at Rightmove, remarked, “Agents report that the market remains very price-sensitive, and despite the current optimism, these are not the conditions to support substantial price growth.

“Sellers who are keen to secure their sale will still need to price realistically for their local market and avoid being overambitious at the start of marketing to give themselves the best chance of finding a buyer.”

Rightmove reported an increase of 12% in the number of new sellers coming onto the market. Increased supply could also have been a motivating factor in the strong demand from buyers.

The average two-year fixed rate mortgage is near 5.8%, with the five-year fixed rate near 5.4% according to a recent report from Moneyfacts. As risk in lending remains high for lenders and confidence declines in a rate cut by the MPC happening soon, mortgage rates could begin to edge upward. 

Remortgage rates will likely do the same, putting financial pressure on homeowners coming to the end of their two-year fixed rate deals this year. In 2022, rates were much lower, borrowing cheaper, and many home buyers then could never imagine the Bank’s base rate would reach 5.25% in just two years. In April 2022, the base rate was only 0.75%, with lender offered rates reflecting the low base rate of the time.

As homeowners near the end of their mortgage term, they are encouraged to avoid being transitioned to their lender’s standard variable rate (SVR) and choose a remortgage. A SVR will have a higher rate than those found with a remortgage and will put the homeowner in a position of paying more than necessary. With the possible savings of a remortgage, homeowners should certainly consider shopping for a remortgage online. It is fast, easy and could put quotes in the hands of the homeowner to review and compare in minutes. 

Remortgage brokers offer a type of one stop shopping as they could offer quotes from a variety of lenders to consider. They often have exclusive deals as well which makes stopping at their website a smart strategy. Homeowners could also visit individual websites of remortgage lenders to gather quotes.

The housing market is a reflection of the current economy, and while the growth recently experienced is a good sign, the warning that it could slow down or even retract slightly is important to consider. For if house prices decline in the near future, it will most likely correct when the MPC cuts the base rate as inflation nears target, so there is less to worry about a burst in the market happening and property values rapidly or steeply declining.