Market Matters Spring 2018

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Halifax’s house price index for April 2018 [1] suggests that the average price of a UK home is now £227,871, which is a 1.5% increase from March to April 2018 and the highest ever recorded price. This also represents a 2.7% increase from the same time in 2017. Halifax doesn’t provide a geographical breakdown, however recent data from estate agent Your Move indicates that Blackburn has the highest growth rate in the UK, meaning that the North, and the North West in particular, makes up much of this positive movement.

It’s not all good news, however, as price growth overall from the last quarter in 2017 to the first in 2018 has actually decreased by 0.1%. Many attribute this to a softening in the market, which is also indicated by the 7% decrease in new mortgage application rates and property sales since this time in 2017 [2].

This may seem surprising given that unemployment has reduced to levels not seen since the 1970s and 402,000 more people are in work compared to this time last year [3].  In addition, the facts that interest rates remain relatively low (despite the Bank of England’s decision to increase them from 0.25% to 0.5 in November 2017); more than half of UK borrowers are on fixed rate mortgages (meaning the negligible interest rate increase should not affect them anyway); the Government has introduced cuts to stamp duties for first time borrowers; and there is, of course, a general shortage in housing, might ordinarily lead one to believe that price growth would be a given.

Many analysts inevitably point to the uncertainty created by Brexit, and inflation squeezing real term wages, as the causes of the softening market. However, recent official figures [5] indicate that inflation decreased from 2.8% at the end of 2017 to 2.3% in March 2018. One would hope that this would lead to a positive impact in the third quarter of 2018.

Whilst the above isn’t necessarily indicative of any serious challenge facing the industry in the near future, it does demonstrate a certain amount of volatility in the market today.


[2] Bank of England Statistical Release published 1 May 2018
[4] See CML briefing, July 2017
[5] ONS Consumer price inflation, UK: March 2018