In October, British house prices reached a new record, rising by 0.2% from September, the smallest increase in three months. Prices were up 3.9% year-on-year, the slowest growth since July. The average house price hit 293,999 pounds, surpassing the previous record set in June 2022. Despite high interest rates, prices have been upheld since mid-2022. The Bank of England's anticipated slower interest rate cuts and the government's tax hike on homebuyers may dampen demand. House prices are expected to continue rising but at a more modest pace throughout the rest of 2024 and into 2025.
British house prices reached a new record high in October, with a modest 0.2% increase from September, marking the smallest rise in three months. The demand for homes may remain subdued if interest rates decline at a slower pace and taxes on home buyers continue to rise, according to Halifax, the mortgage lender.
The October price increase matched the median forecast. Year-on-year, prices were up by 3.9%, the slowest growth since July, when the Labour Party took office and issued warnings about tough times ahead to address the economy, which affected consumer confidence.
The average house price now stands at 293,999 pounds (USD 380,288), surpassing the previous high of 293,507 pounds in June 2022, a period when the Bank of England was raising interest rates just before the 'mini-budget' crisis caused a sharp rise in mortgage rates.
Despite the challenges posed by higher interest rates, house prices have largely plateaued since mid-2022, with a 0.2% increase during this time. However, the expectation that the Bank of England will reduce interest rates more slowly than anticipated, along with the rise in taxes on homebuyers introduced in the new government's recent budget, could dampen future demand.
While house prices are expected to continue rising, the pace of growth is likely to slow down for the remainder of this year and into the next. The Bank of England is anticipated to lower its benchmark interest rate at 1200 GMT on Thursday, marking only the second reduction since 2020. However, investors are adjusting their expectations, anticipating fewer rate cuts between now and the end of 2025, following the government's announcement of larger-than-expected borrowing and spending plans in the recent budget.
In conclusion, although British house prices have reached new heights, the pace of growth is likely to decelerate in the coming months. A combination of high interest rates and increasing taxes on homebuyers may limit demand and affect the housing market's momentum. While modest growth is expected, economic factors such as the Bank of England's cautious approach to interest rate cuts and government budgetary changes will influence the pace of recovery. With market conditions remaining uncertain, future price increases may be slow and steady, rather than sharp, over the next year.
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