A closely-watched survey from one of the UK's biggest home loan providers has found that house prices slipped again last month. The Halifax said the prospect of higher bills at a time of rising inflation was a factor in the market. Homebuyers are facing higher mortgage rates as the Bank of England prepares to contain a wave of inflation from higher fuel prices amid war in the Middle East.
The monthly rate of house price decline identified by the lender slowed to 0.1 per cent in April, from 0.5 per cent in March. It took the average UK house price to £299,313 from £299,609. Year-on-year, prices continued to rise, but at a slower rate, of 0.4 per cent from 0.8 per cent in March.
Amanda Bryden, Halifax's head of mortgages, said: "After a strong start to the year, recent global developments have added a greater degree of uncertainty to the outlook. In particular, higher energy prices have fed into inflation expectations, prompting markets to reassess the path for interest rates – a shift that has already pushed up borrowing costs for many buyers."
Rightmove Mortgage Update
Separate numbers from the UK's biggest property website, Rightmove, offered fresh insight into rising mortgage costs. The £3.2bn company said its latest market data revealed that both two-year and five-year fixed rate mortgages were averaging 5.1 per cent, up from 4.3 per cent for two-year deals and 4.4 per cent for five-year deals in December.
The Bank of England has all but confirmed that interest rates will be hiked in the coming months as oil prices have shot up, despite opting to hold them at its last meeting. Its Monetary Policy Committee warned interest rates could climb back to 5.25 per cent from the current level of 3.75 per cent, cancelling all six interest rate cuts seen over the last two years.
This sharp change in the direction of interest rates would take place in a scenario where oil prices exceed $130 per barrel and sustain high levels for the next year and a half. Its updated forecasts suggested inflation would exceed six per cent while growth would also suffer a hit.
Bryden added that the redrawn outlook for interest rates "understandably leads to more caution among some households." Nonetheless, she described the housing market as "resilient": "While activity is likely to cool in the near term, the underlying picture remains one of relative stability, supported by wage growth that continues to outpace house price inflation."
