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  • Writer's pictureElliot Leigh

Is the UK housing market on its way back up?

Updated: May 18, 2023

The prospect of rising mortgage rates in the UK housing market is creating uncertainty, as potential home buyers worry that rates could climb even higher. While current rates are still below where they were in 2021, many mortgage consumers believe that rates could climb in the months ahead, making it difficult for them to be confident about their ability to buy a home.

Ongoing volatility in the labour market has made the housing market more challenging, as some people have delayed purchases until they "see greater stability," while others may have given up on the goal altogether.

UK house prices fall at fastest annual rate since 2012

House prices have fallen at a time that household finances have come under pressure from rising interest rates and high inflation, which has outstripped pay increases. Additionally, with mortgage rates at the highest levels on record, affordability is stretched.

February saw the UK house pricing fall at its fastest annual rate since 2012. Falling to its lowest level since November 2020 with a 1.1% decline, it sees the average price of property drop to £257,406, according to Nationwide.

House prices fell 0.5% in February (almost £900), compared with a month earlier, the sixth month in a row that they have declined on the building society’s regular survey. UK house prices are now 3.7% lower than they were at the peak reached in August 2022.

A recent survey showed that those who want to sell their home in the current conditions are having to shave an average of £14,000 off the original asking price. Making cash buyers the biggest winners in the current market.

First time buyers entering the market

Despite the recent house price falls, more prospective first-time buyers would still face higher-than-average mortgage repayments when buying a home in the UK, according to Nationwide. In addition, young adults looking to buy a home would also face challenges saving for a deposit due to rising rental costs and costs of living.

Robert Gardner, Nationwide's Chief Economist has said:

“The start of 2023 saw a further slowing in annual house price growth to 1.1%, from 2.8% in December. Moreover, January saw a further monthly price fall (-0.6%), which left prices 3.2% lower than their August peak (after taking account of seasonal effects).

“Conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”

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