In October 2024, the average price of a home in the UK reached an all-time high, according to the country’s biggest mortgage lender, Halifax. The data shows that the average house price hit £293,999, surpassing the previous record of £293,507 from June 2022. This increase of 0.2% in October marks the fourth consecutive month of price growth, bringing the annual growth rate to 3.9%, although this is a slight decrease from the 4.6% recorded in September.

Despite concerns over the state of the economy and rising interest rates, homebuyers seem to have continued purchasing homes at a steady pace. However, Halifax warns that future demand could slow down because of new policies introduced by Chancellor Rachel Reeves in her budget.

Amanda Bryden, the head of mortgages at Halifax, expressed surprise that house prices had risen above the 2022 levels, particularly given the challenges posed by higher mortgage rates. She pointed out that it was significant that prices had not dropped much since the summer of 2022, a period when the UK was emerging from the pandemic. This time was marked by pent-up demand and what was called a “race for space,” with many people looking to buy homes that offered more space to work and live.

Halifax’s data also indicates that the housing market has shown signs of improvement recently. Despite ongoing affordability issues, such as the impact of higher mortgage payments, the number of mortgages being agreed has reached its highest level in two years. This suggests that, while buyers may be facing challenges, they are still moving forward with home purchases.

However, the outlook for the future of house prices may not be as optimistic, according to Halifax. The mortgage lender predicts that although house prices are likely to keep increasing, the rate of growth will slow down. This means that while homes might continue to get more expensive, the price rises will not be as steep as they have been in the past year. This shift could be influenced by the new policies introduced in Rachel Reeves’s budget.

In her budget speech, Chancellor Reeves proposed several changes that could affect the housing market. One of the key changes was an increase in stamp duty for second-home buyers and buy-to-let investors. The stamp duty on these types of property purchases has been raised from 3% to 5%. This could make buying a second home or investment property more expensive, potentially reducing demand from investors.

Additionally, Reeves introduced changes to the stamp duty thresholds for first-time buyers. The nil-rate threshold for first-time buyers, which is the price level below which no stamp duty is charged, has been lowered from £450,000 to £300,000. This means that fewer people will be able to benefit from lower stamp duty when purchasing their first home, which could discourage some buyers from entering the market. For those purchasing an additional home, the nil-rate threshold has been reduced from £250,000 to £125,000, which could further limit the number of people willing or able to buy a second home.

These changes are likely to slow down demand for homes, particularly among first-time buyers and those looking to buy second homes or investment properties. The increased costs associated with purchasing these properties, along with the higher mortgage rates currently in place, could make it more difficult for people to afford to buy a home.

Another potential impact of Reeves’s budget is the effect on mortgage rates. The policies introduced in the budget could slow down the expected rate cuts by the Bank of England. Markets had anticipated that interest rates would decrease sooner, but now they expect that rate cuts will happen more slowly. This could mean that mortgage rates remain high for a longer period of time, making it more expensive for buyers to borrow money to purchase homes. As a result, higher mortgage costs could discourage some buyers from entering the market, further affecting demand.

Halifax’s predictions suggest that while house prices are likely to keep rising, they will do so at a slower pace. The mortgage lender expects modest growth for the rest of the year and into 2025, which means that although the housing market will not experience a dramatic fall, it may not see the rapid price increases of recent years.

The housing market in different parts of the UK is experiencing different trends. Northern Ireland has continued to see the highest price growth, with the average property price rising by 10.2% compared to the previous year. The average price for a property in Northern Ireland is now £204,242. In England, the north-west region has also seen strong price growth, with properties now costing an average of £235,587, up by 5.9% from last year. London, on the other hand, has seen more modest growth, with the average property price rising by 3.5% to £543,308.

The ongoing challenges in the housing market, including higher mortgage rates and changes to tax policies, are likely to continue to shape the outlook for home prices in the coming months. While the market remains relatively strong, these factors could limit the rate at which prices rise, and demand could slow down as buyers adjust to the new economic environment.

In conclusion, while UK house prices have reached record highs, the future of the housing market looks less certain. The changes introduced in Rachel Reeves’s budget could lead to slower demand for homes, especially among first-time buyers and investors. Although house prices may continue to rise, the growth is expected to be more modest in the coming months. The overall impact of these changes will depend on how buyers and the wider economy respond to the new policies and the ongoing challenges in the housing market.