House prices lifted by 0.9% in October to a new record average of £371,158 as housing shortages outweighed turmoil in the mortgage market since last month’s mini-budget, according to Rightmove.
The property website’s latest House Price Index says the 0.9% rise is a softening from the five-year average rise in October of 1.2%, but adds, “there is little sign of downwards price pressure on existing properties for sale”.
However, the annual rise this month is 7.8%, compared to 8.7% in September.
The data comes after more than a thousand products have been pulled over the last few weeks as lenders work out how to reprice loans as the cost of debt for the government and companies has risen on international money markets, following former Chancellor Kwasi Kwarteng’s tax-cutting mini-Budget late last month.
New Chancellor Jeremy Hunt is expected to give an emergency statement on the mini-budget in an effort to reassure financial markets later today.
The average rate for a two-year fix rose 31 basis points, to 6.47%, while the average rate for a five-year fix grew by 22 basis points, to 6.29%, according to Moneyfacts last Friday. Average two-year and five-year fixes were under 3% last December.
Rightmove’s report says: “Rapid mortgage rate rises understandably cause some new movers to pause their plans and wait to see how the next few weeks unfold.”
It adds that buyer demand this month is still 20% higher than the more normal market of 2019, but it is down by 15% in the last two weeks compared with the same two weeks last year.
The survey points out that, “the first-time buyer sector appears hardest hit by interest rate increases”, with demand in the last two weeks dropping by 21% compared to the same two weeks last year, though it is 24% higher than in 2019.
“The vast majority of agreed sales are still going ahead,” the report adds.
Just 3.1% of sales agreed have fallen through in the two weeks since the mini-budget, which is in line with the 3% over the same two weeks in 2019.
The survey points out: “Agents report that buyers are rushing to complete before their lower fixed-rate mortgage offers expire.”
Rightmove director of property science Tim Bannister says: What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget.
“There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues. New sellers coming to market in the month have been pricing strongly, and the number of homes that were already on the market seeing a reduction in price is still well below the long-term average.
“It will take a bit of time for the market to settle to a new, more ‘normal’ level of activity following over two years of market frenzy, especially with new developments happening almost daily at the moment.
He adds: “The vast majority of buyers who had already agreed their purchase are still going ahead.
“Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rises, and now face a difficult situation with rents also rising, and a shortage of available homes to rent.
“Buyer demand was already starting to soften and higher interest rates were anticipated, but they’ve been brought forward sharply due to market uncertainties.”
