The Current House Price Growth Rate

Following the annual house price growth slowing to +0.6% last month, the property market continues to adjust to high mortgage rates. These rates have increased mortgage repayments in the UK by an average of £216 per month. This is a 23% growth.

In the last four weeks, demand, sales, and availability have dropped. Compared to the same period between 2018 and 2022, demand is 34% lower and sales agreed are down by 20%. Due to mortgage rates increasing, a combination of weaker demand, price-sensitive buyers, and fewer sales this year, house price growth has slowed down. Currently, the overall annual house price growth sits at 0.1%, which is the lowest it has been for 12 years.

The Impact on First-Time Buyers

Varying house price growth can partially be explained by first-time buyers (FTBs) facing higher mortgage rates. FTBs account for 1 in 3 property sales each year. The majority of FTBs originate from the private rental market, having moved over to homeowner status during the lower mortgage rates of recent years. Mortgage repayments on these lower rates meant that buying was far more affordable than renting. Due to this, the FTB demand was met. Many buyers took advantage of lower mortgage rates and bypassed the market of smaller homes, instead buying three-bed properties.

The increasing interest rates this summer, though, have reversed this trend. Even with growing rental prices, renting is now 10% cheaper than buying due to rates exceeding 5%. House price growth is consequently slowing to accommodate a large buyer section of the market.

However, the FTB experience varies across the country. Even with the house price growth rate slowing or property prices dropping in the South and even the Midlands, buying a home remains more expensive than renting. London alone sees average mortgage repayments 24% higher than monthly rent in the same area. The higher mortgage rates are pricing first-time buyers out of the South’s property market. First-time buyers are still encouraged to look North, where buying remains more affordable than renting.