House prices edged up in October

House price rises2

The housing market in the UK picked up once again between September and October, with a 0.2 per cent rise in average prices recorded by Nationwide.

As well as positive month-on-month growth, the Halifax Price Index simultaneously recorded a price increase of 4.5 per cent in the year to October, up from four per cent in September.

Despite both price indexes reporting growth in their most recent announcement, the reports differed when it comes to the average house price in Britain, with Nationwide recording a price of £211,085, lower than Halifax’s £225,826.

Although there were disagreements on the average house price in the UK, both organisations said low mortgage rates and healthy employment growth are providing support for house prices over the coming months.

Interest rate rise

The predictions that interest rates would rise in November, which proved to be correct, contributed to the growth in demand for new homes. Many buyers rushed to take advantage of the lower interest rates to secure their mortgage.

Commenting on the figures Nationwide’s chief economist Robert Gardner, said: “Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.”

While the interest rate rise led to increased demand, it is unlikely that the increase from 0.25 per cent to 0.5 per cent, the first in a decade, will have a significant impact on borrowers. The vast majority of new mortgages in recent years were on fixed rates and therefore will not be impacted, while lenders have also significantly reduced variable rate products due to a lack of demand, so new buyers will still have the option of fixed terms at slightly increased rates.

Russell Galley, managing director of Halifax Community Bank, said: “We do not anticipate the base rate rise will be a barrier to buying a house.”

Remortgagors need to act fast

In announcing the 0.25 per cent interest rate increase on November 2, the Bank of England’s Monetary Policy Committee also alluded to further interest rate increases in the coming months. While the rise has not had a significant impact in the immediate term, further rises will likely see borrowing becoming more expensive.

This will have a significant impact on those looking to remortgage their property as a previous deal comes to an end. Those looking to remortgage will not be able to access the lowest rates any longer, but acting now will likely mean a better rate than will be possible in six months’ time, if Bank of England forecasts are correct.

Borrowers coming towards the end of their fixed-term deals should take action now to avoid future disappointment as it seems the market will see further rate rises in the near future.

Those looking for the best deal on a mortgage should visit our mortgage calculator, created with the Mortgage Advice Bureau.