UK housing market remains stable despite mortgage rate and inflation pressures

Created: 29 Mar 2023
UK housing market remains stable despite mortgage rate and inflation pressures

The rate of new house building is predicted to fall in England, yet property experts predict an overall price fall in 2023, with mortgage rates and inflation remaining high amid the broader cost of living crisis and other factors specific to the housing market.

There is significant variation, depending on the region and the price bracket of homes hitting the market. For first-time buyers and second-steppers, prices were up last month by 0.5 per cent and 0.4 per cent respectively, while homes in the upper price bracket rose by 1.2 per cent to £658,702 nationally according to Rightmove research.

Prices in the north are rising faster month on month than in London, up 1.1 per cent in the north-west and 2 per cent in the north-east, relative to a fall of 0.1 per cent in the capital. Nonetheless, the market is continuing to recover from turbulence at the end of 2022, with stability and confidence returning to the market.

The UK housing market has been stable, with average house prices up by nearly £3,000 this month, standing at £365,357, despite low growth and high mortgage rates, which had prompted predictions of a 10 per cent fall in prices in 2023 from entities such the Office for budget responsibility (OBR).

The typical March rise of 1 per cent over the past 20 years has been missed, but this still reflects a market on a much more stable footing than expected. The market is recovering from a spike in borrowing costs at the end of last year on account of prime minister Liz Truss, which spooked international investors, but mortgage rates are beginning to fall as lenders compete to win business in a less buoyant market.

The Bank of England has hinted that it will soon pause its quickest cycle of interest-rate increases in three decades, giving a break to those who need to take out a mortgage to finance their purchases.

Despite the uncertainty, there are still opportunities for those looking to buy or sell a property, especially in regions where prices are competitive, such as Luton, yet still discover quality living experiences.

“While higher mortgage rates and economic headwinds raise challenges, many potential home movers who were effectively side-lined in the frenetic bidding wars of the last two years will find that a slower-paced market gives them time to plan and secure their next move.”