The UK housing market is in a period of growth. The reason the many house price indices are indicating strong demand is being credited to increased incomes and lower interest rates from lenders on mortgage offers. There has also been an increase of supply in available homes on the market, including starter homes for first-time buyers. Increased house prices reveal a healthy economy, but there is concern that house prices are already elevated from the buying boost caused by the pandemic when there were historically low interest rates. If house prices are on the rise, then what is ahead for home buyers and what will it mean for homeowners? We want a healthy and robust housing market, but rapid growth could be bad.

The UK housing market grew at the fastest rate in nearly two years in September according to data recently released by Nationwide. The average house price grew annually by 3.2% bringing it to £266,094. The strong demand from home buyers is being credited to the recent mortgage interest rate cuts by lenders and rising incomes. The data released by Nationwide reflects their own mortgage lending and not that of the market overall and does not include cash purchases.

The housing market has a dependency on first-time buyers, they are needed, or the entire system goes belly up. The system works that starter homes are purchased by first-time buyers, then in the usual process, the starter home is sold as the homeowner upgrades to a larger home for their growing family. Home movers changing properties due to relocation for employment often will upgrade according to the house prices of their new area. Without a first-time buyer to show attention in the market to the homes from first time homeowners, things slow down in the market and much of those homes that have difficulty in finding a buyer become part of a landlord’s portfolio and enter the rental market. 

Homeowners are certainly facing much better remortgage offers now than just weeks ago. Lenders have become competitive as economic optimism has grown with the lowering of inflation and the Bank of England’s Monetary Policy Committee (MPC) making a cut to the standard base interest rate in August. It was the first cut to the base rate since March 2020 when the rate was reduced to the all-time historic low of 0.1%. The most recent reduction took the base rate from a sixteen year high of 5.25% to 5.0%. 

Once a home buyer becomes a homeowner, they likely want little to do with the consideration of loans, mortgages, or interest rates. They have handled that process and want to put it behind them and enjoy their new journey as a homeowner. However, homeowners should make it a habit of shopping for a remortgage. It takes only minutes to shop online for a new deal. At the very least, the result will bring valuable information, and the biggest reward would be the opportunity to save money with a lower interest rate. 

The latest data released by the Office for National Statistics (ONS) has revealed that the increase in house prices in the year to July grew 2.2%. It is the fifth consecutive month of recorded annual increases. The previous month’s data revealed a 2.7% annual increase, but last year as interest rates remained high and inflation was taking a toll on the economy, the housing market had less buyer demand. Prior to the five consecutive months of house price increase, the ONS had reported eight consecutive months of annual house price declines. The average house price is now £290,000.