Strongest Housing Market Since Truss Mini Budget | Home Prices

The UK housing market is at its strongest since Leeds Trust's infamous micro-budget sent borrowing costs soaring, according to the latest figures.

According to Nationalwide, home prices rose by an annualised 2.4% in August, up from 2.1% in July and the fastest pace since December 2022.

Separate figures from the Bank of England showed that around 62,000 mortgages were approved for homebuyers in July, the highest level since September 2022, the same month as the former prime minister’s disastrous mini-Budget. The central bank also revised its mortgage approvals figures slightly upward for June.

The UK housing market was boosted this month by the Bank of England's cut to 5 per cent from 5.25 per cent, the first such cut in four and a half years. Lenders responded by introducing more competitive mortgage rates, with Lloyds Bank, the UK's biggest mortgage provider, announcing on Thursday that it would increase the maximum amount it would lend to new buyers.

Experts say the $2 billion initiative will open up home ownership to more potential buyers, with Lloyd's and Halifax chains set to allow new buyers to borrow up to 5.5 times their household's annual income, up from 4.49 times.

Summer may be coming to an end, but there is no end in sight as improvements are being made across the UK property market, says Marc von Grundherr, director of estate agent Benham and Reeves. “It is amazing how quickly the market has accelerated in just a few months.”

Von Grundherr said Labour had warned that the October budget would be painful and that the economy could be worse off in the short term, but that it would not slow down the booming housing market recovery. He said it was unlikely to dampen the ambitions of Britain's buyers and sellers, who were moving with confidence after a long period of market uncertainty.

Earlier this month, mortgage lender Halifax forecast UK house prices would continue to rise for the rest of the year as mortgage rates began to fall following the rate cut.

Nationwide said the average house price in the UK fell 0.2% month-on-month in August to $265,375. The monthly decline was the first since April and reversed the monthly increase of between 0.2% and 0.4%, but the average UK house price remains at its highest level since October 2022.

Nationwide chief economist Robert Gardner said while house price growth and transaction activity remain low by historical standards, the figures paint a picture of resilience even in a higher interest rate environment, with house prices remaining high relative to average incomes, making it harder to save up for a deposit.

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Verona Frankisi, CEO of online real estate seller Yoppa, said the new figures were the first to show home price performance since interest rates were cut in early August. She said the very small monthly decline, the first in four months, helped to further boost market momentum, with annual home price growth once again showing strength.

Frankish said interest rates remain significantly higher than what buyers and sellers are used to, but the expectation that the Bank of England will cut rates again this year will further strengthen buyers' willingness.

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