UK House Prices Surge for Third Month: Cheaper Mortgages Drive Demand

UK house prices rose for a third consecutive month in September, driven by favorable mortgage rates and increased incomes. This trend reflects a growing confidence among buyers, signaling a robust housing market.

In a notable turn of events, UK house prices have experienced an upward trajectory for the third consecutive month in September, buoyed by the dual forces of more affordable mortgages and rising incomes that have enticed a greater number of buyers into the fray. According to data released by Halifax, the average price of a typical home has ascended by 0.3%, reaching £293,399 ($384,900), tantalizingly close to the record high established in June 2022. Year-on-year, house prices have surged by 4.7%, indicating a robust recovery in the housing market.

This resurgence follows a somewhat erratic recovery phase at the beginning of the year and a successful evasion of the anticipated market crash in 2023. The confluence of rising real incomes and the Bank of England's inaugural interest-rate cut since the onset of the pandemic in August has served to unlock a reservoir of pent-up demand, coaxing prospective homeowners out of their cautious sidelines. 

Market conditions have exhibited a steady improvement throughout the summer months and into early autumn. The easing of mortgage affordability, attributed to vigorous wage growth and declining interest rates, has significantly bolstered confidence among potential buyers. Indeed, the number of mortgages agreed upon has surged by over 40% in the past year, reaching levels not seen since July 2022.

While the improved affordability of mortgages is expected to sustain buyer activity—especially in light of anticipated further interest rate reductions—housing costs continue to pose a formidable challenge for many. Consequently, it is anticipated that property price growth will remain modest for the remainder of this year and into the next.

This report adds to the growing body of evidence suggesting that the UK housing market is poised for growth. Separate data from Nationwide Building Society revealed that UK house prices experienced their most significant increase since February last month, while Rightmove reported that average asking prices surged at double the typical rate. Notably, house prices have risen across all UK regions in the year leading up to September, with Halifax noting that Northern Ireland has exhibited the most pronounced gains, boasting a remarkable 9.7% increase. 

In London, the UK’s priciest region, home values have climbed by 2.6%, now averaging £539,238—just £13,354 shy of the peak reached in August 2022. Should the market continue to outperform expectations, a relief bounce in activity could materialize before Christmas, potentially extending into the following spring.