House prices hitting a new record high
The latest Halifax house price index shows the average UK house price grew once again, with house prices hitting a new record high of £282,753, a month on month increase of 1.4% and £28,113 higher than this time last year.
Since the start of the pandemic house prices have seen considerable growth and the cost of the average UK house is now £43,577 higher than pre-pandemic levels. At present, despite the financial squeeze many are beginning to feel, this growth is continuing to be being propelled by strong demand and too little housing stock.
However, the current circumstances are expected to put the brakes on runaway house prices. The situation in Ukraine remains unstable and the cost of living crisis is being felt increasingly by the day, particularly as the energy price cap and national insurance increase have both now come into play. Given the increased financial instability, first time buyers and prospective home movers will likely think twice before embarking on the expensive process of buying a new home with houses prices hitting a new record high.
Interest Rate Rises?
What’s more, the Bank of England is expected to increase interest rates further, which will further reduce people’s spending power. Prior to the outbreak of war in Ukraine, inflation was expected to peak at 7.25%, this is now likely to be considerably higher and the only way to combat it is with increased rates. Should this happen, the already dwindling number of cheap mortgage rates will quickly disappear and monthly costs will see a swift increase. Should less people look to move home as a result, the cost of house prices may finally start to see a slowdown.
Over the next few months we will see how the housing market truly reacts to the current circumstances, but with houses prices hitting a new record high it is unlikely they will continue rising at the same pace seen in recent times. If we do see a slowdown, there will likely be a gradual fall as opposed to a sudden drop as there remains simply too much demand and too little stock which will keep house prices raised for some time yet.