7 March 2022
If you are covering the Halifax House Price Index, please see the following comment from Karen Noye, mortgage expert at Quilter:
“We are living through extraordinary times and despite jumping from crisis-to-crisis house prices not only remain robust, they completely shatter expectations. Today’s Halifax index shows the average house price once again reached a new record high of £278,123, a month on month increase of 0.5%. Year-on-year prices grew 10.8% - the fastest pace of annual growth since June 2007.
“However, a convergence of factors may put the brakes on runaway house prices. The invasion in Ukraine continues to shock the world and its impact will ripple throughout the UK’s economy. One of the main reasons this could affect house prices is due to the West turning its back on Russian energy. At a time when energy costs were already set to soar, prices may go even higher than predicted. Even food could get more expensive with the price of wheat also set to rocket. All this means that first time buyers and prospective home movers simply have less cash to splash making them think twice about embarking on the expensive process of buying a new house, which could financially destabilise them at the worst possible time.
“On top of these barriers, any deposit for a house will be continually eroded by inflation reducing people’s spending power. The Bank of England before the Ukraine conflict predicted inflation to peak at 7.25% in April, but the war may cause it to go higher and stay that way for longer. The only way to combat this will be to increase interest rates and naturally this will mean lenders are forced to take their cheaper mortgage deals off the shelves. This will further price people out of the market and potentially make others think twice before making a move. Those on long fixed rate mortgage deals will feel insulated by any huge interest rate spike for the time being but first time buyers or those coming to the end of their deals won’t have such luck and will see their monthly repayments bulge.
“Ultimately, 2022 could see house prices slow significantly if not drop as the economy deals with the prospect of war in Europe. However, the UK suffers a significant housing problem as there simply is not enough stock. Until the shortfall is met house prices are likely to stay relatively high. As a result, this continues to make the prospect of buying your first home incredibly difficult. With taxes likely to go up to pay for the pandemic response, the cost of living increasing and house prices staying incredibly high, there are few worse times to try and get on the housing ladder.”
