House Price Index - May 2023
Anticipated interest rate hikes aimed at controlling inflation are expected to push mortgage rates higher, impacting the housing market in the UK.
In the first half of 2023, falling mortgage rates contributed to increased market activity. However, it is anticipated that demand and market activity will weaken in the latter half of the year.
House prices and housing market activity have been adjusting to the effects of higher mortgage rates and rising living costs. Over the last six months, the UK price index has recorded a decline of 1.3%.
Although the rate of monthly price falls has slowed down due to improved buyer confidence, the annual rate of price inflation is 1.9%, significantly lower than the 9.6% recorded a year ago. Regionally, house price inflation varies from -0.2% in London to 3.6% in Wales.
Expectations suggest that prices will remain relatively stable for the rest of the year. However, higher-than-expected inflation data has increased the likelihood of further interest rate increases. As a result, mortgage rates are likely to edge higher in the coming weeks, potentially impacting buying power and demand for homes in the second half of the year, depending on the extent of rate increases.
The housing market is projected to experience the biggest impact on the number of housing sales, which are forecasted to be 20% lower than the previous year in 2023.
Summary
UK house prices have fallen 1.3% over the last six months.
The rate of price falls has slowed as activity levels recover.
Stronger growth in new sales has attracted more sellers into the market.
Above-average activity has been observed in the North East, Scotland, and London.
Weaker demand, but sales have held up in the Midlands and southern England.
Regional trends are explained by recent price inflation and affordability factors.
Mortgage regulations have mitigated the impact of higher mortgage rates on house prices.
The possibility of higher mortgage rates in the second half of the year is expected to weaken demand and activity, but the scale of the impact will depend on the extent of rate increases.
