House prices rise in July as stamp duty changes fade into rear-view mirror

 “The latest Halifax House Price Index shows that house prices rose by 0.4% in July, taking annual growth to 2.4%. After a subdued first half of the year, this suggests some momentum is building again and represents the biggest monthly increase since the start of the year.

This improvement comes despite the lingering impact of stamp duty threshold changes earlier in the year, which have increased upfront costs for many buyers and us being deep into the summer lull. While mortgage rates have drifted lower and affordability rules have been eased, many households are still constrained by high living costs and sluggish income growth. For first-time buyers, even small increases in rates or property prices can make the difference between buying and staying put.

While markets have priced in a rate cut later today from the Bank of England, stickier-than-expected inflation has clouded the picture, and a hold could happen, which could shift the direction of travel.

There was, however, some welcome news for borrowers recently as the Financial Conduct Authority announced changes to its mortgage rules, easing affordability requirements for customers looking to switch to cheaper deals or reduce the term of their mortgage. Removing the need for a full affordability assessment in certain cases, such as reducing mortgage terms or switching to a more affordable product, should help borrowers make financially beneficial changes with less friction. This is particularly timely given the rise in longer-term mortgages that stretch into retirement, which pose risks to later-life finances.

Still, reducing your mortgage term will usually mean higher monthly repayments, so it won’t be suitable for everyone. In some cases, continuing with a longer term and making regular overpayments could strike a better balance between flexibility and interest savings.

The FCA’s move, alongside the Treasury’s decision to make the mortgage guarantee scheme permanent, signals a growing focus on tackling the structural barriers to affordability. But while these changes are helpful, they won’t fix the bigger issue which is a lack of housing stock.

As we move towards autumn, the stamp duty changes will begin to fade into the rear-view mirror, and some of the recent hesitancy could translate into renewed activity, particularly if the Bank of England signals that more rate cuts are still on the table for later in the year. The path ahead will depend heavily on what happens next with interest rates and household finances.”