7 June 2024
If you are covering the Halifax House Price Index, please see the following comment from Karen Noye, mortgage expert at Quilter:
"According to Halifax’s latest House Price Index house prices have remained relatively stable with the average house prices in May, down just -0.1%. Broader economic trends are shaping consumer appetite, which in turn are driving this stability but lack of growth.
"The modest drop still points a resilient housing market and there are several factors contributing to this. Wages have been rising steadily, with average pay increasing by around 6%. This coupled with lower inflation, has boosted consumer confidence, making buyers feel more financially secure. Additionally, unemployment remains relatively low. Therefore, those who can stomach the new affordability criteria in this higher interest rate environment are keeping the market afloat.
"Labour’s announcement last night of their “freedom to buy” scheme while headline grabbing is unlikely to have any significant impact to the housing market in the short term. In contrast, Labour’s pledge to build 1.5 million homes and overhaul the planning system could initiate far greater change. Addressing the limited housing stock in the UK is the key piece of the puzzle. By increasing the supply of new homes, it will make homeownership more accessible to a broader range of people.
"The “freedom to buy” policy aims to help young people get onto the housing ladder by making the mortgage guarantee scheme a permanent fixture. However, the well-meaning scheme introduced by the Tories, has so far been only marginally impactful.
"Generally, first time buyers can only borrow up to 4.5 times their annual income, meaning those on average salaries can only secure mortgages slightly over £150k, which doesn’t offer much choice in the current market. Often saving for a larger deposit or receiving financial help from family provides more options.
"Additionally, high loan to value ratios increases the risk of negative equity, especially if house prices fall. This could leave new homeowners in a difficult position if they need to sell their property, as they would have to cover the negative equity, moving costs, and a new deposit.
"Regardless of Labour’s announcements, high mortgage rates continue to be a significant hurdle for lots of people. The European Central Bank’s decision to cut interest rates yesterday may set the trend for the Bank of England but it is still too early to say exactly when we will see the base rate cute.
"The next rate decision is due on the 20th June and even if the rate is not cut if the mood music is that a cut is on the horizon then lenders may feel confident enough to start cutting rates in a bid to drum up business."
