UK House prices: rising, stable or falling?

House Price Indices

There are four main commercial house price indices published every month: Halifax, Nationwide, Zoopla and the government's own Land Registry/Office for National Statistics (ONS). OnTheMarketalso publishes its Property Sentiment Index on a monthly basis, while other companies such as Propertymark and Cornerstone make comments and projections about what these latest statistics might mean to the market, to buyers and to sellers (and also to the agents and others involved in the process).

The most recent Halifax House Price Index (for July 2023) suggests that, while there has been a small fall over the month (aggregately larger across the year), they suggest that the housing market remains resilient. Kim Kinnaird, Director at Halifax Mortgages, clarifies this further by saying in her accompanying write-up that prices have changed relatively little in the last six months, while the annual rate of falling prices has also slowed.

Correspondingly, the Nationwide House Price Index (also for July 2023) is a little more cautious, noting a small fall in house prices for the month, with a further albeit small decrease in prices highlighted for the period across the year. Nationwide's Chief Economist Robert Gardner's commentary suggests that the market is at its weakest since July 2009.

Meanwhile, in the Zoopla House Price Index (for the same month) points to a very small increase in prices generally across the same period, while noting similar falls across the year. This time, Zoopla's Executive Director for Research points to a fall in buyer demand as mortgages had gone up in line with the Bank of England's decision to raise the base rates.

Finally, the ONS House Price Index (this one only has the latest information up to May 2023) shows an estimated average house price increase for the month, with an increase highlighted across the twelve months to that point.

They are all differing although quite similar views since they are looking at the data in different ways, underlining the complexity of the exercise and why clickbait headlines should not necessarily be believed. But the overall sentiment is that the housing market is - generally speaking - remaining relatively static and that we are, for now at any rate, unlikely to witness a crash.

Looking forward

The media frequently reports on the state of the housing market, usually associated with some of the reports that come out of the institutions already discussed above.

For example, the Evening Standard reports from the angle of the increasing disparity between the rate of house inflation against the how much a Londoner earns in a year.

At the same time, up until early August 2023, mortgage lenders were almost falling over themselves to reflect the latest in a long line of fourteen monthly updates to the Bank of England Base Rate(currently sitting at 5.25%). Any change in the base rate will have a potential impact on rates offered for any type of loan including mortgages.

That was until a week ago when news reports started coming through that four of Britain's biggest lenders cut rates on fixed-rate mortgage deals, immediately followed up by further reports that more mortgage companies were joining other lenders in announcing mortgage rate cuts.

This news seems to indicate that the main mortgage lenders are concerned about the mortgage market if it remains stagnant or even falls over successive months (the best marker of the state of the market rather than pinpointing the effects of just one month in isolation). Fewer buyers needing a loan is a simple economic equation: less money coming in from providing such loans leading to lower profits.

Will there be a mortgage rate war, as some media outlets are questioning? Really, it's too early to tell since a group of big lender names have all taken it in turns to reduce their rates. Whether this will continue to be the case with each undercutting the others remains to be seen.

But, what it does tell us - with a note of continuous caution - is that this is good news for the buyer. And, by association, the seller, since lower rates will potentially increase the demand for properties as buyers take advantage of the cheaper availability of loans.