House prices hit new record high
7th February 2022 08:38
by Myron Jobson from interactive investor
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Double whammy of higher interest rates and escalating cost of living has done little more than tap the brakes on runaway market says interactive investor.
Commenting on the latest Halifax House Price Index, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “A double whammy of higher interest rates and the escalating cost of living has done little more than tap the brakes on a runaway housing market, with house prices remaining on the upwards trajectory in January – albeit the smallest monthly increase since June 2021.
“The ongoing demand-supply mismatch for property - especially for family homes – continues to prop up house prices. It also means the market could slow in the near future, with some buyers waiting for more homes to become available before making a move.
“The direction of travel for interest rates is up, it seems, to help combat inflation, which the Bank of England predicts will balloon to 7.25% by April. Rate rises would compromise affordability for those who can least bear it: first-time buyers. This is compounded by increasing cost of living pressures which, for many, could push their goal of buying their first home further out of reach.
“While mortgage rates remain low by historical standards, buyers have to save bigger deposits than they did pre-pandemic as UK house price growth has significantly outpaced the rise in average earnings in recent history.
“Last year’s gravity-defying growth in house prices was underpinned by the unleashing of pent-up demand for property, economic recovery, ultra-low mortgage rates and a stamp duty incentive. These market conditions will be difficult to replicate in 2022 and the prospect of rising inflation and interest rates could exert a cooling influence on the housing market.”
Key points
- Monthly house price growth fell to +0.3%, lowest rise since June 2021
- Annual rate of growth remains steady at 9.7%
- Average house price edges up to new record high of £276,759
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