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Signs of softening house price growth?

Signs of softening house price growth?

Category: Mortgages

Updated: 07/01/2016
First Published: 07/01/2016

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

House prices seem to be on a permanent upwards spiral at present, but there are times when the pace of that growth appears to soften. Halifax's latest House Price Index suggests this very thing, but that doesn't necessarily mean that prices will be falling anytime soon.

The figures

December's Index showed that, despite the annual growth rate rising to 9.5% (up from 9.0% in November), the quarterly growth rate has remained below 2% for the second consecutive month. House prices in the three months to December were 1.6% higher than in the previous three months, slightly higher than the quarterly growth rate of 1.4% recorded in November, but low enough to indicate "a possible slight softening in the underlying rate of price growth", said Martin Ellis, Halifax housing economist.

This may come as welcome news to those struggling to take the first step (or even the second or third) up the housing ladder, but it my still not be that easy, or cheap, to get your foot in the door. Prices still rose strongly on an annual basis and month-on-month they posted a 1.7% uptick, a sharp turnaround from last month's Index which recorded zero monthly movement, which means that the price of an average property in the UK now stands at £208,286.

The future

However, even though price growth is showing signs of moderating for the time being, this isn't something that's expected to continue. Prices are anticipated to rise further in the coming months, fuelled by the ongoing supply/demand imbalance, as there simply aren't enough homes on the market to cope with the number of people who want to buy.

"There remains a substantial gap between demand and supply," explained Ellis, "with the latest figures showing a further decline in the number of properties available for sale. This situation is unlikely to change significantly in the short term, resulting in continuing upward pressure on prices."

This can be seen when looking at current levels of housing activity. House sales from September to November were 5.2% higher than the previous year, and were also 1.4% higher than in the preceding three months, while supply fell for the 10th successive month. In fact, the number of homeowners putting their properties up for sale fell to a fresh low in November, and this imbalance is unlikely to drastically improve in the near-future.

What does it all mean?

Essentially, this means that it isn't going to be any easier for prospective buyers to take the first (or next) step up the ladder, with prices expected to continue rising in the year ahead. That's why it's so important to be completely prepared to attack the market – make sure you've got a suitable deposit by saving as much as you can, even if it means making a few sacrifices, and once that's under control you'll need to look for a suitable mortgage deal to help keep affordability in check. The right kind of planning can make all the difference, and can ensure you're able to snap up your dream home no matter what happens to prices as a whole.

What next?

Compare savings accounts to build your deposit

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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