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UK house prices rose at their fastest pace since January, a leading property index shows, with demand improving despite ongoing market uncertainty over likely tax changes in this month’s budget.
Prices increased by 0.6% month-on-month in October pushing the average cost of a UK home to a record high of £299,862, according to Halifax.
It marked a reversal from an unexpected 0.3% drop in prices recorded in September and was stronger than the 0.1% monthly increase forecasted in a Reuters poll of economists. On an annual basis, house prices also rose 1.9%, with that figure also shooting past forecasts for a 1.5% rise.
“Demand from buyers has held up well coming into autumn, despite a degree of uncertainty in the market, with the number of new mortgages being approved recently hitting its highest level so far this year,” said Amanda Bryden, head of mortgages at Halifax, which is part of the wider Lloyds Banking Group.
However, affordability continues to be a challenge, with many buyers opting for smaller deposits and longer terms to help make the numbers work.
Although average fixed rates on mortgages continues to hover around 4%, and are likely to ease further in the coming months, record-level property prices continue to make moving “feel like a stretch” for many prospective homebuyers, Bryden said.
“Rising costs for everyday essentials are also squeezing disposable incomes, which affects how much people are willing or able to spend on a new property,” she added. “Even so, while there has been some volatility, the market has proven resilient over recent months.”
October’s 0.6% rise suggests buyers have been willing to look past jitters over potential tax rises in Rachel Reeves’s budget on 26 November. The Guardian reported in August that the chancellor was considering replacing stamp duty with a new levy on the sale of homes worth more than £500,000.
Some industry experts are expecting a further increase in home-buying activity from December onwards, with the budget being held about a month later than last year’s set-piece fiscal event.
“October’s property market was noticeably calmer as many buyers have paused to see what the budget might bring,” Matthew Thompson, head of sales at estate agent Chestertons, said.
“Some buyers remained active and were able to secure good opportunities, particularly where sellers were willing to negotiate. Once there is more clarity from the chancellor’s announcements, we expect buyer activity to pick up as those waiting on the sidelines re-enter the market.”
Bryden concurred: “With house prices rising more slowly than incomes for almost three years now, we expect the trend of gradually improving affordability to continue.”
