unforeseen downturn uk housing prices take a hit despite prediction of resilience 146

Market Trends

Unforeseen Downturn: UK Housing Prices Take a Hit Despite Prediction of Resilience


Benjamin Hughes

April 5, 2024 - 07:31 am


Dimming Growth: The Unexpected Dip in UK House Prices

In a surprising turn of events, the UK housing market has experienced a downturn, marking the first decline after a steady half-year of growth. According to comprehensive data released by Halifax lender, house prices have stumbled for the first time in six months, raising concerns about the stability of the property sector's growth prospects.

UK House Price Index

A Sudden Slip in March

The latest figures from Halifax have revealed a 1% drop in the average house price, which is now valued at £288,430 ($364,160) as of March. This decline comes on the heels of a moderate 0.3% rise in February and follows modest increments over the preceding four months. The setback in prices echoes the abrupt decrease witnessed in the Nationwide Building Society's indexes earlier in the week—a twist that economists perceive as a temporary disruption in what was expected to be a year of minor positive adjustments or sustained levels in the market.

Halifax's year-over-year comparison indicates a marginal 0.3% increase in property prices, hinting at a sluggish yet persistent upward trajectory in the past year. Economic experts speculate that with the anticipated reduction in the Bank of England's interest rates, the property market will return to form, presumably igniting a firmer demand that would drive UK prices to rise by approximately 3% by the end of the year.

The Property Market's Undulating Journey

Tom Bill, the head of UK residential research at Knight Frank, remarked on the market's dynamics stating, “The direction of travel for the property market is currently sideways.” He added, "Once a rate cut seems inevitable and more mortgage rates commence with a 3, we anticipate a boost in demand that will translate to stronger growth for UK house prices within this fiscal year."

Other signs, however, remained optimistic about the market's durability. Consumer demand has shown signs of improvement and sellers have become increasingly active, with a noticeable uptick in the number of properties being listed for sale. This activity is largely due to a dip in mortgage expenses and the widespread prediction that interest rates will fall later on in the year. In line with this, mortgage approvals reached an apex unseen in 17 months, according to statistics compiled in February.

Resilience Amid Rising Interest Rates

Although the market encountered a minor decline, the overall resilience of house prices is notable, particularly given the major hike in interest rates that commenced in 2022. Kim Kinnaird, director of Halifax Mortgages, reflected on the market's fortitude, “Despite the fluctuations, house prices have exhibited surprising durability in the face of substantially higher borrowing costs.”

Meanwhile, the online property platform Rightmove gathered exceptional activity, reporting the most significant day for new sellers entering the market this year—a noteworthy indicator of market confidence. While mortgage rates have normalized since reaching a 15-year peak last summer, recent weeks have seen a slight rise again. The average rate for a two-year fixed mortgage escalated from 5.55% in late January to 5.81%, as per Moneyfacts. Nevertheless, rates are still significantly lower than the nearly 6.9% peak last summer, offering a cushion as the Bank of England gears up to potentially lower interest rates.

Regional Variances in the UK

House price movements have not been uniformly distributed across the United Kingdom. In the capital, London, prices have been generally stagnant, with a mere 0.4% increase compared to last year. Conversely, Northern Ireland has stood out as the best-performing region with a 4.3% jump. A so-called 'north/south divide' has become apparent, with the North West of England enjoying a robust 3.7% surge on a year-over-year basis.

Market forecasters are eyeing the central bank closely, with expectations leaning towards a policy easing in August. By year's end, the market has almost fully accounted for three rate reductions.

The Conundrum of Affordability

Affordability remains a central concern for potential homebuyers, countered only by existing homeowners who are cushioned by fixed-term deals. According to Kinnaird, the full impact of the enhanced interest rates has yet to be felt across the market. It raises the prospect that homeowners may opt for competitive pricing strategies to maneuver within the changing economic landscape.

Kinnaird also noted that the financial sector's optimism regarding the Bank of England's rate cuts scale and timing has diminished slightly, putting a pause on the mortgage rate drops that previously gave the property market a much-needed impetus.

Anticipating Economic Adjustments

The intertwined relationship between mortgage rates, central bank policies, and the property market's health remains at the forefront of economic conversations. The prevailing sentiment suggests cautious anticipation as the housing market prepares to adjust to looming interest rate cuts.

The market awaits the central bank's next moves to gauge the potential impact on mortgage costs. Current trends indicate that consumers and sellers alike may need to recalibrate their financial strategies to adapt to the changing economic climate.

Navigating the Mortgage Maze

The task ahead for prospective homeowners is to navigate the increasing complexity of mortgage rates and the property market's response to broader fiscal policy changes. The challenge of affordability becomes accentuated when juxtaposed with the upward creep of borrowing costs, even if they remain below the staggering highs of the past summer.

For potential buyers, the key lies in remaining vigilant about rate fluctuations and seizing opportunities as mortgage rates potentially retreat later in the year. Existing homeowners are likely to confront the reality of refinancing at higher rates, which underscores the necessity for strategic financial planning.

Moving Forward

As the market steadies in this sideways trajectory, the resilience demonstrated throughout the previous tumultuous months may be put to the test. House prices, being a crucial pillar of consumer wealth, will continue to be a barometer for broader economic health.


The UK's housing market finds itself at a crossroads, with paths leading to potential recovery and others perhaps to more prolonged stagnation. The delicate interplay of interest rates, buyer demand, and external economic pressures will dictate the directions the market takes in the upcoming months.

The slight decrease in housing prices could symbolize the beginning of a market cool-down or merely represent a temporary blip in the face of a resilient market that has weathered greater storms. With baited breath, stakeholders across the spectrum await to see whether the market will rally once more or brace itself for a new normal of moderated expectations.

For now, the market narrative continues to unfold, with the latest Halifax data prompting financial analysts and homebuyers to stay attuned to the central bank's impending rate decisions. The property market's future, it seems, is as ever, a story in the making.

(Note: This news article uses data and images from Halifax and Moneyfacts, and updates from Bloomberg L.P. to provide an accurate representation of the UK housing market's current state.)

(If you are looking for more information on the UK housing market or mortgage rates, please visit the websites of Halifax, Moneyfacts, or Bloomberg L.P.)