UK house prices climbed for the third month in a row in September to about £100 short of a record high as rising worker pay and falling interest rates helped make mortgages more affordable for some homebuyers, according to a leading index.
Data released by Halifax, Britain’s biggest mortgage lender, showed that prices climbed by 0.3% last month, extending a streak of rising prices that began in July. The month-on-month increase matches the 0.3% rise recorded in August.
It means that the price tag of the typical UK home edged higher by £859 in cash terms to £293,399 – just shy of the £293,507 peak set in June 2022, three months before the then prime minister Liz Truss’s disastrous mini-budget.
On an annual basis, prices rose 4.7%. That is slightly higher than the 4.3% recorded in August, but still the highest rate of growth since November 2022.
The housing market has been given a leg-up by the Bank of England, which in August slashed interest rates for the first time in four-and-a half years from 5.25% to 5%. It has led to a renewed mortgage price war among commercial lenders, which have been cutting their own mortgage rates in a bid to capture a larger share of the market after months of relatively sluggish growth.
Some, such as Nationwide building society, are also raising the borrowing cap for first-time buyers, allowing some to take on mortgages worth up to six times their earnings, in order to attract new customers.
“Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates,” said Amanda Bryden, the head of mortgages at Halifax. “This has boosted confidence among potential buyers, with the number of mortgages agreed up more than 40% in the last year and now at their highest level since July 2022.”
However, Bryden said it was unlikely to shift the dial for most prospective homebuyers, who are still priced out of the market. She warned that property prices would remain subdued into 2025.
“While improved mortgage affordability should continue to support buyer activity – boosted by anticipated further cuts to interest rates – housing costs remain a challenge for many. As a result we expect property price growth over the rest of this year and into next to remain modest,” Bryden added.
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Separate research by the estate agent Hamptons published on Monday laid bare the challenges facing young homebuyers. Average mortgage payments for generation Z – those born in the late 1990s – are poised to be roughly double the total paid by previous generations when they first go on the property ladder, at £1,739 a month.
That compares with millennials, who were born in the 1980s and early 1990s, who have been paying an average £863 a month. Meanwhile, a first-time generation X buyer paid about £923 a month, while baby boomers paid £775.
The difference is due to steady house price inflation, and the level of interest rates when they buy their first home.