1000% Return on House Prices in 40 Years, Says Lender

House prices have shown a staggering 974 per cent return since one of Britain’s biggest lenders, The Halifax, started keeping records in January 1983. 

Then, the average house price was £26,168, and mortgage interest hit 11 per cent - the lowest house price tracked by the index.

Forty years later, the average house price has soared to £281,272, but mortgage rates are just 3.5 per cent.

As of today (26 January 2023), London had the highest home prices, averaging £38,056, compared to today’s £541,239. Yorkshire was the cheapest place to buy at £20,332 compared with £205,466. The Northeast is the most affordable region, with homes averaging £169,980 to buy.

January’s Halifax House Price Index reveals the market slowed in all regions in December.

House prices falling

Between November and December, prices dropped 1.5 per cent, while the annual growth rate was down two per cent.

The average UK home now costs £281,272, down from £285,425 in November.

“As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market,” said Kim Kinnaird, director, Halifax Mortgages.

“The housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year. It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.”

The data echoes the latest findings from the government’s official house price index from the Office for National Statistics (ONS).

Homes worth less

The ONS figures revealed year-on-year prices fell from a 12.4 per cent rise in October to 10.3 per cent in November.

The ONS says an average UK home was worth £295,000 in November - a gain of £28,000 in 12 months but £1,000 less than the price in October.

The North-West was the region with the highest level of price growth, rising 13.5 per cent during the year, while London had the most sluggish increase of 6.5 per cent.

“Recent annual percentage changes in house prices have been volatile because of volatility in prices in 2021. For example, the October 2022 annual percentage change was high, partly caused by a sharp fall in UK average house prices in October 2021, following changes to Stamp Duty Land Tax. This is known as a base effect,” said the ONS report.

House prices where you are

House price changes by region in the  year to November 2022:

Source: ONS

Meanwhile, another big mortgage lender, The Nationwide, published data that shows higher mortgage rates have led to a squeeze on finances as home loan repayments swallow a more significant bite of take-home pay.

Andrew Harvey, Nationwide’s senior economist, said: “The biggest change in terms of housing affordability for potential buyers over the past year has been the rise in the cost of servicing the typical mortgage as a result of the increase in mortgage rates.

“This trend began in earnest towards the end of 2021, with typical five-year fixed rates rising from 1.3% in late 2021 to 2.9% by mid-2022, as market interest rates that underpin mortgage pricing rose steadily, reflecting expectations that the Bank of England would have to raise rates significantly in the years ahead to help bring surging inflation back to its target rate of 2%.

Mini-Budget fiasco

“But mortgage rates surged after the mini-Budget in late September, reaching their highest levels since 2010, over four times higher than the lows prevailing in 2021.

“While wider financial market conditions had stabilised by the end of 2022, with market interest rates falling back towards the levels prevailing before the mini-Budget, mortgage rates are taking longer to normalise.”

Nationwide also agreed house prices were falling in December, with growth down from 4.4 per cent in November to 2.8 per cent in December.

Again, the data showed prices had ground to a halt in every region, with East Anglia performing strongest and Scotland the weakest.

The lender calculates the average house price as £262,068, compared to £263,788 in November.