Average UK house prices have risen by nearly £3,000 this month, according to the latest data from property website Rightmove. The average home on the market in March is £365,357, a rise of 0.8% on the previous month, defying predictions of a significant slump in 2023.
The increase is below the typical March rise of 1% over the past 20 years but still reflects a market “on a much more stable footing than many anticipated”, Rightmove said. The market is recovering from a spike in borrowing costs at the end of last year, when policies put forward by Liz Truss and her chancellor Kwasi Kwarteng spooked international investors and sent mortgage costs soaring.
Average rates for a five-year fixed deal with a 15% deposit soared to 5.89% in October, shortly after Kwarteng’s doomed “mini-budget”, prompting estate agent Savills to predict a 10% slump in prices during 2023. The rate for the same mortgage deal has since fallen back to 4.65%, though this is still well above the 2.48% seen this time last year.
Estate agent Knight Frank said borrowing costs could fall further, as lenders compete to win business in a less buoyant market. Central banks have also been tipped to think twice about raising base rates, given turmoil in the banking sector after the collapse of Silicon Valley Bank and the crisis engulfing Credit Suisse. Inflation has edged down to 10.1% from a peak of 11.1%, while recent economic figures have shown the UK narrowly averting a recession.
Underlying factors, such as the UK’s apparent inability to build new homes, are also preventing large price falls. The Home Builders Federation has warned that the rate of new housebuilding is predicted to fall in England, owing to a range of government policies that threaten to slow development dramatically.
Yet property experts are still predicting an overall price fall during 2023, with mortgage rates and inflation still stubbornly high amid the broader cost of living crisis. Tom Bill, head of UK residential research at Knight Frank, said: “Downwards price pressure will persist as more owners come to the end of fixed-rate deals and supply picks up from the lows of the pandemic.”
