The average price of a home in the UK was £281,000 as of February, according to new figures. But prices vary significantly across different regions.
ADVERTISEMENTIn February, house prices in the UK increased by an average of 0.4% on the previous month. However, there has been an annual decline of -2%, according to the latest UK House Price Index (UK HPI).
The annual price fall lowers the average house price in the UK to £281,000 (€328,000), with prices varying significantly depending on the location of the property.
The North East saw the highest monthly increase in house prices, rising by 3.2% in the year leading up to February 2024. Meanwhile, the North West experienced the highest annual growth, with prices increasing by 2.9% over the same period.
Despite an annual price fall of -4.8%, London remains one of the most expensive markets, with the average property value at £503.000 (€588,000).
Conversely, the average property value in Wales is less than half, standing at £211,000 (€246,000), and experiencing an annual price fall of 1.2%.
UK housing market and the mortgage landscape
In February, there were 82,940 transactions involving houses or residential properties being bought or sold, with each transaction valued at £40,000 (€46,000) or more, a 6% decrease compared to February 2023, according to the UK Property Transactions Statistics.
UK mortgage rates fell for years, making homes more affordable but also boosting demand and prices.
While mortgage rates have eased from the summer’s peak, the Bank of England’s decision to maintain base interest rate at 5.25% in September contributed to a rise in UK house prices.
While most will see a modest increase in monthly payments, over a million homeowners could face hikes exceeding £300 (€350) by late 2026 according to Statistics & facts.
A delayed timeline for interest rate cuts has pushed up mortgage costs, holding back buyer demand.
ADVERTISEMENTThe average price of a home in the UK fell by 1% from February to March, said Britain’s biggest mortgage lender, Halifax, on Friday.
Last month’s drop, the first recorded since September, comes after a 0.3% rise seen in the month to February.
March’s figure was up 0.3% year-on-year, much lower than the 1.45% annual rise expected by economists polled by Reuters.
A typical UK home now costs £288,430 (€336,298), around £2,900 (€3,381) less than last month.
“The housing market remains weak on the back of a prolonged period of elevated interest rates as the market waits patiently for the Bank of England to start loosening monetary policy,” said Victoria Scholar, Head of Investment at interactive investor.
“Expensive mortgage rates have disincentivised property transactions, pushing rental costs through the roof instead.”
During the final months of last year, after the BoE decided to hold the base interest rate at 5.25% in September, house prices began to climb in the UK.
In January, the prospect of a rate cut then prompted many lenders to offer cheaper mortgage deals, although this confidence appears to have been short-lived.
Markets, which had originally expected the BoE to move in spring, are now predicting that rate cuts will arrive in June.
The average two-year fixed mortgage rate has consequently climbed to 5.81%, up from 5.55% in late January, according to Moneyfacts.
Halifax’s data chimes with trends outlined by competitor lender Nationwide earlier this week.
On Tuesday, Nationwide claimed that UK house prices fell by 0.2% between February and March.
Yet, whilst lenders have reached a broad consensus regarding the market’s downturn, there are some grounds for optimism.
“It’s hard not to ignore wage growth which is benefitting people’s finances and some of the housebuilders have suggested that consumer confidence is improving,” said Russ Mould, investment director at AJ Bell.
Although the housing market is likely to remain subdued until a rate cut arrives, prices have shown surprising resilience in light of a challenging economic context.
Some experts have also suggested that the monthly decline is a normal part of the market’s readjustment, given last year’s sharp rebound in prices as the cost of living crisis began to ease.
Looking at regional trends, Northern Ireland came out as the strongest performing area in Halifax’s report, recording a +4.3% year-on-year jump in house prices.
Halifax equally noted a stark divide between the cost of buying property in the north and south of England, with the former being more affordable.
ADVERTISEMENTCheaper average costs often allow for greater house price growth, as fewer buyers are priced out of the market.
In England, the North West saw the strongest expansion, with prices up by +3.7% on an annual basis.
Own New in the UK has launched a mortgage product that will enable borrowers to take out a loan with an interest rate under 1% for those buying new builds – is this the new era of home financing, and will it catch on in Europe?
ADVERTISEMENTThe Own New Rate Reducer product launched with Halifax, Virgin Money, and Barratt Developments today – 26 February – along with other housebuilders across the country joining from 4 March.
‘It could unlock lower mortgage rates and reduce your monthly payments, whether you’re a first time buyer or an existing homeowner,” Barratt Homes said on its website.
How does the Own New Rate Reducer work?
Dependent on the build stage of your chosen home, Barratt Homes said it could contribute either 3% or 5% of the purchase price towards your move.
The contribution goes directly to your mortgage lender (through the 3rd party Own New), which could subsequently reduce your mortgage interest rate by up to 3.19%.
Own New founder, Elliot Darcy, told the Financial Times: “Our ethos is to make home ownership and mortgage lending in this country open to more people and we are confident that the launch of the Own New Rate Reducer will achieve that.
“Alongside the national lenders and housebuilders who have signed up to the scheme, we believe that Rate Reducer will be a significant boost to many people’s home-buying dreams.”
Darcy also highlighted to the FT that “this is just the product” to stimulate the housing market and to give more people a “helping hand and initial boost” to get onto the property ladder.
However, many experts have criticised the new product, including Matthew Jackson, director at mortgage advisers Mint FS, who told Sky News: “Why would lenders and developers sign up to such a scheme? Is it to benefit buyers or themselves? I suspect it is the latter, with the removal of Help to Buy, lenders have a huge hole in mortgage lending and developers are struggling for sales.
“Without a doubt developers will use these affordable mortgages to increase house prices, meaning a premium will be paid for own new stock, and the payment shock at the end of the product will be enormous.
“Will the buyer be advised correctly? Doubtful. This has disaster written all over it.”
Will mortgages with rates below 1% catch on in Europe?
The Own New Rate Reducer is only available to those in the UK. For Europe, no such product is yet to be introduced.
As highlighted by Statista in a November 2023 report, mortgage interest rates tend to be lower in the Nordic countries due to the financial stability and reliability of its borrowers.
“Other factors that influence the mortgage interest rates include inflation, economic growth, monetary policies, the bond market and the overall conditions of the housing market,” Statista said on its website.
It also notes that more stable markets also tend to have higher average prices with France, Austria and Germany among some of the highest new dwelling prices in Europe.
Statista also recently highlighted how mortgage interest rates soared in Europe in 2022, resulting in many countries seeing rates double in just a year.
“During the COVID-19 crisis, mortgage rates in Europe were at their lowest, as countries tackled the economic effects of the pandemic. With inflation rising, central banks gradually increased the interest rates, resulting in higher mortgage borrowing costs. In Hungary, the average mortgage interest rate reached close to 10% in the first quarter of 2023, up from about 3.5% in 2022,” the data platform said.