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House prices continue to moderate

House prices continue to moderate

Category: Mortgages

Updated: 08/01/2015
First Published: 08/01/2015

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 It is now over 6 months old so the content may be out of date.

Since the summer of 2014 reports have revealed a gradual slowdown in the rate of house price growth in the UK market, allaying fears of an impending 'housing bubble'. This price moderation is now expected to continue throughout 2015, thanks to a better balance between supply and demand.

Slowing growth

According to the latest Halifax House Price Index, house prices in the last three months of 2014 were just 0.3% higher than in the previous three months. This marginal increase marks the fifth consecutive monthly decline in price growth and is the lowest rate of growth recorded since November 2012 when prices decreased by 0.3%.

Annual house prices have also recorded a dramatic fall-back from the peak of 10.2% in July with growth of just 7.8% being registered. This yearly increase is now at its lowest rate since January 2014 (7.3%). This leaves the average seasonally-adjusted house price in the UK standing at £188,858.

A better balance

This continued moderation in house price growth is matched by a slowdown in house sales. According to HMRC, home sales fell to 98,490 in November – the first time sales had dropped below 100,000 since November 2013. Mortgage approvals also recorded a fall: Bank of England figures show that the volume of mortgage approvals in November fell to 59,029, marking a 23% drop from the start of the year when 76,611 approvals were made.

But why is demand for housing declining? Martin Ellis, housing economist, argues that questions around affordability are to blame. "The deterioration in housing affordability as a result of rising house prices, earnings growth that has been consistently below consumer price inflation until very recently and speculation of an interest rate rise have combined to temper housing demand since the summer," he said. "[This] weakening in housing demand has led to a reduction in both price growth and sales in recent months."

The housing market in 2015

So what does the future hold for the UK housing market? Given the gradual moderation in house price growth over the last few months, and the continued speculation as to the timing of a base rate rise, Halifax predicts that house prices in 2015 will rise by just a modest 3-5%, leaving the peaks witnessed in the summer of 2014 firmly behind. However, housing demand is likely to be supported by a growing economy along with "rising employment levels, still low mortgage rates and the first gain in 'real' earnings", commented Martin Ellis.

If 2015 is the year for you to take the plunge and get that mortgage for your dream home, it's time to start making preparations! Saving for a deposit should be your top priority – to help you on your way, check out our best savings deals. Once you have saved up you will need to make sure that you have found the perfect mortgage. Start your search with our mortgage best buy tables; this will help you to start narrowing down your options.

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