Mortgage costs are still the biggest challenge facing homebuyers and those taking out fixed-term deals, the UK’s biggest mortgage lender has said.
However, the squeeze caused by higher interest rates is likely to gradually ease as incomes rise and house price growth remains subdued, said Amanda Bryden, head of mortgages in Halifax.
According to the lender’s latest figuresthe average house price in the UK was relatively stable in June, falling by 0.2% from the previous month.
The average UK house price stood at £288,455 last month, Halifax said, down from £288,931 in May.
Prices rose by 1.6% from a year ago, echoing the latest figures from building society Nationwide.
Ms Bryden said, however, the market was “delicately balanced” and sensitive to how quickly any change to the Bank of England’s base rate could be made.
The UK’s Central Bank began raising its key interest rate at the end of 2021 in an attempt to tackle rising inflation. Prices rose as pandemic-related restrictions were eased, causing supply chain crises, and food and energy prices rose after Russia’s invasion of Ukraine.
The Bank’s prime rate currently stands at 5.25%, the highest level in 16 years.
However, at its last rate-setting meeting, the Bank appeared to hint that it could cut rates at its next meeting on August 1.
Despite this, many homeowners who are nearing the end of a fixed-rate deal are now facing much higher mortgage rates than they are used to.
Last week, the Bank said that approx three million households will see their mortgage payments rise in the next two years.
The current average rate for a two-year fixed deal is 5.93%, although this is down from last year’s peak of 6.86%.and major lenders have cut rates in recent days.
In its latest figures, Halifax said Northern Ireland saw the fastest regional house price growth, up 4% on the previous year.
London still has the most expensive property prices, now averaging £536,306.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said house prices and sales have been “lukewarm” for most of the year so far, and do not look “likely to warm up any time soon”.
The market was “suffering”, she added, due to a combination of higher mortgage rates and “high” house prices as demand outstrips supply.
The property market is likely to be at the top of the new government’s agenda in the coming weeks and months, Ms Coles said.
Professor Sir John Curtice told the BBC that the general election results highlighted how the Conservatives performed poorly in countries where more than a third of households have a mortgage.
He suggested that this could be due to the turmoil seen in the markets after the September 2022 mini-budget.
During the election campaign, Labor focused mainly on tackling housing supply, with a promise to build 1.5 million homes over the next parliament.
It aims to do this by reforming planning rules and allowing development in lower-quality areas in the green belt, called the “grey belt”.
Overhauling the planning system, however, is likely to be a “gradual and complicated process”, Ms Coles said.
Shares in housebuilders rose on Friday in reaction to the Labor victory, with Vistry Group, Persimmon and Taylor Wimpey all up around 4%.
Halifax predicted that property values were likely to rise modestly this year and into 2025, while other mortgage brokers suggested the resolution of the election campaign could boost the market.
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