House costs get pleasure from summertime increase, says ONS

House prices boomed between July and August, according to the latest figures from the Office of National Statistics.

The average home rose in value by 1.5 per cent monthly from £288,533 in July to £292,924 in August, representing the second-highest monthly rise in the last two years.

It marks the sixth month in a row in which home values have moved up and means annual property inflation is running at 2.8 per cent.

The figure is also marks a clear distance to the previous peak, reached in late summer 2022, when prices hovered around £288,500 for a few months, before falling as low as £277,782 in March 2023.

House prices are rising at different levels across Britain and also depend heavily on the type of property.

Much of the growth is being driven by new build prices which are selling for 25.6 per cent more than they were this time last year. 

However, the ONS warned that the number of transactions had been lower than usual, which could have skewed the results. It also noted that there was ‘substantially greater uncertainty’ around new build prices.

Meanwhile, the average house prices across existing and resold property only rose 0.5 per cent in August and 1.3 per cent annually. 

On a regional level, price rises also differ greatly.

In England, the typical home is up 2.3 per cent compared to last year; In Wales, there has been a 3.5 per cent jump; in Scotland a 5.4 per cent annual rise and in Northern Ireland, home values have risen 6.4 per cent.

Within England, the North West has experienced the largest house price gains, up 4.6 per cent over the past 12 months.

However, the South West has seen little change, with prices nudging up by 0.8 per cent since August 2023.

Why are house prices rising? 

Increased political certainty and lower mortgage rates are said to be the cause, according to Emily Williams, director of research at Savills.

‘The market has been boosted over the summer by easing mortgage costs, and increased certainty in the aftermath of the General Election,’ said Williams.

‘The most recent mortgage data from the Bank of England showed that monthly mortgage approvals have risen to their highest levels since the 2023 mini-budget.

‘Still, there is the capacity for more demand to be released, particularly from home movers, as rates continue to fall.’

The ONS figures are widely viewed as the most comprehensive and accurate house price index. This is because this report by the UK’s official statisticians uses Land Registry data and is based on average sold prices. However, this also means its data lags behind other indexes.

Jonathan Hopper, chief executive of Garrington Property Finders says that the market has since cooled somewhat.

‘The property market enjoyed a strong Starmer start. But Budget uncertainty means recent weeks have felt more like a Reeves retreat.

‘While today’s official data reveals that August’s property market was heating up nicely, things have cooled since then,’ said Hopper. ‘Impressive and welcome though these numbers are, they may be more blip than boom.’

He added: ‘In recent weeks price growth has slipped back into neutral in many areas. A rush of sellers putting their home on the market means that many buyers find themselves spoilt for choice and able to negotiate hard on the price they pay.

‘The slowdown in activity is most acute at the top end of the market, where many sales are discretionary.

‘Wealthy buyers have been spooked by reports of painful tax rises to come in this month’s Budget, and some prospective sellers have gone into an early winter hibernation and decided to hold off on listing their home for sale until the spring.’

Mortgage rates set to rise again

It is true that mortgage rates had been falling at quite a pace since the summer.

Between the start of July and the end of last week, the cheapest available five-year fixed rate mortgage fell from 4.28 per cent to 3.68 per cent.

Meanwhile, the lowest two-year fix fell from 4.68 per cent to 3.84 per cent during that time.

However, they are now creeping back up again with the lowest five-year fix at 3.79 per cent and the lowest two-year fix at 3.9 per cent.

NatWest has said it is upping mortgage rates, following on from Santander and TSB earlier in the week. 

More lenders are expected to increase rates over the coming weeks because Sonia swap rates – an inter-bank lending rate, have been moving higher in recent weeks.

When Sonia swaps rise sufficiently it often results in fixed mortgage rates going up, and vice versa when they fall.

At present, brokers are arguing that there is little to no margin for lenders to make money, which is why some are having to re-price their deals higher.

Chris Sykes, technical manager at mortgage broker Private Finance said: ‘For residential rates, we have started to see lenders increase their fixed rates and expect to see this continue as they are likely priced below Sonia swap rates right now.

‘The level of rate increases has differed wildly depending on the lender, ranging from between 0.1-0.3 per cent to significantly more.

‘These larger rate hikes are mainly from lenders who find they are far too competitive for the specialisation they offer, or their business volumes are too high and want to reduce demand.’