Housing market cools as interest rate hikes and the cost of living crisis take their toll

Housing market cools as interest rate hikes and the cost of living crisis take their toll

Roger Pettingell Sarasota Real Estate

The red hot housing market has shown ‘tentative’ signs of cooling as rising interest rates and the cost-of-living crisis take their toll.

The average cost of a home in the UK hit a record high of £271,613 last month – up a bumper 10.7 per cent or £26,000 on a year earlier.

But that was slower than the 11.2 per cent increase seen in May, according to the report from Nationwide.

The average cost of a home in the UK hit a record high of £271,613 last month – up a bumper 10.7% or £26,000 on a year earlier. But that was slower than the 11.2% increase seen in May

And while it marked an 11th month in a row that house prices have increased, the mortgage lender noted most regions of the UK saw a ‘slight slowing’ of price growth over the spring.

Nationwide chief economist Robert Gardner said: ‘There are tentative signs of a slowdown, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels in April and surveyors reporting some softening in new buyer enquiries.

‘Nevertheless, the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low.

‘The market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year. 

Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.’

The South West of England saw the strongest pace of growth in the year to June, with average prices up 14.7 per cent at £318,325. 

London, meanwhile, was the weakest performer although prices still managed to rise by 6 per cent to an average of £540,399, maintaining its status as the most expensive region of the UK.

House prices boomed during the Covid-19 pandemic as buyers rushed to snap up properties with gardens and more living space after they had spent months stuck inside during lockdown.

A stamp-duty holiday introduced by Chancellor Rishi Sunak fuelled demand further, causing supplies to dwindle and prices to shoot up despite the tax saving.

Predictions of a slowdown in the breakneck pace of UK house price growth were shared by others in the industry.

Geoff Garrett, director at mortgage broker Henry Dannell, said there was ‘no doubt’ recent increases in interest rates had ‘dampened buyer appetites’ during the second quarter of the year and reductions in property values were likely to emerge in the months ahead as the cost of living crisis intensified.

Chris Hodgkinson, managing director of property investment group HBB Solutions, said the rate of price growth seen during the pandemic ‘simply isn’t sustainable’ and the ‘winds of change’ were starting to blow.


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