over 1 year ago • 1 min
UK house prices – as tracked by the UK’s official house price index – were a robust 12.4% higher in April than they were the same time last year. But look at the index by its month-to-month measure, and you can see that the UK property market is actually slowing down, and quickly. It shows prices rose just 0.4% between April and March – way less than the 1.2% average gain of each of the previous six months.
There are two key things driving this slowdown. First, mortgage rates: the two-year fixed mortgage rate with a 75% loan-to-value ratio jumped to 2.63% in May from 2.36% in April, and 1.57% six months earlier – its sharpest half-year increase since 2003. That’s made buying property more expensive and pushed some would-be buyers out of the market. And according to research firm Pantheon Macroeconomics, that mortgage rate is only going to keep rising as the Bank of England continues to hikes interest rates, hitting about 3.7% by the end of the year.
Second, consumer confidence, which is at its lowest since records began. Low consumer confidence deters people from spending big money on things like property, and we’re seeing that in Google Trends data: searches for the top three property websites had cooled off in the first week of June, compared to the first quarter of 2022.
This isn’t a flash in the pan: Pantheon says the one-two punch of the above will probably limit house price growth throughout the rest of the year.
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