UK house prices have experienced their fastest annual growth rate in almost two years, with prices rising by 3.2% in September compared to the previous year.
This increase, driven by falling borrowing costs and growing expectations that the Bank of England will continue to lower interest rates, follows a 2.4% annual growth in August.
The average house price across the UK reached £266,094 in September, a 0.7% month-on-month rise, although prices remain 2% below the peak levels recorded during the summer of 2022.
House prices increase as borrowing costs drop
The rise in UK house prices in September can be attributed to a combination of falling borrowing costs and increased affordability.
Robert Gardner, Nationwide’s chief economist, noted that income growth has outpaced house price growth in recent months, improving affordability for prospective buyers.
He also pointed out that mortgage rates have edged lower, which is further fuelling housing demand, despite activity and house prices still being lower than historical standards.
Nationwide’s data revealed that the September growth of 3.2% is the highest annual increase since November 2022.
The average house price now sits at £266,094, with prices rising by 0.7% month-on-month.
This follows a period of rate cuts by lenders, as expectations for further reductions by the Bank of England continue to influence the mortgage market.
Northern Ireland leads with 8.6% house price increase
In terms of regional growth, Northern Ireland led the way in the third quarter of 2024 with an 8.6% year-on-year increase in house prices.
Scotland also saw strong growth, with house prices up by 4.3%, while Wales experienced a more modest rise of 2.5%.
Overall, house price growth in the north of England outpaced the south, with northern prices increasing by 3.1% year-on-year compared to just 1.3% in the south.
Terraced houses saw the largest price gains in September, with an annual increase of 3.5%, while flat prices rose by 2.7%.
Despite this, detached homes have seen the strongest long-term growth, with average prices rising nearly 26% since the first quarter of 2020, compared to a 15% increase for flats during the same period.
This reflects the post-pandemic ‘race for space’ trend, where demand for larger properties remains elevated.
Borrowing limits expand as lenders offer more favourable rates
Alongside house price growth, lenders are becoming more accommodating with their mortgage products.
Nationwide, Halifax, and HSBC are now offering five-year fixed-rate mortgages at below 4% for the first time since early 2024.
This has opened up more opportunities for first-time buyers, particularly with Nationwide’s recent decision to offer loans at six times the annual household income, while Lloyds and Halifax have increased their borrowing limits to 5.5 times income.
The Bank of England’s decision to hold its base rate at 5% in its latest review has added further momentum to the housing market.
The BoE has indicated that while rates are trending downward, further cuts will depend on sustained evidence that they will remain low. As borrowing costs continue to decline, house prices are expected to experience further support.
Northern housing market outpaces southern regions in 2024 growth
While house prices are rising across the UK, the north of England is seeing particularly strong performance.
In the three months to September 2024, house prices in the north grew by 3.1% year-on-year, compared to just 1.3% in the south.
This trend underscores a wider regional disparity in house price growth, with Northern Ireland and Scotland emerging as key areas of robust housing market activity.
The outlook for the UK housing market remains cautiously optimistic, as falling interest rates are expected to improve affordability further.
While house prices are still subdued compared to historic highs, recent data suggests a gradual recovery as borrowing conditions improve.
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