House prices rise by 1.5% amid stable mortgage market
- House prices in the UK increased by 1.5% this year, following a 7.2% rise in 2022.
- Mortgage rates have stabilized, and household incomes for buyers have risen by 9 to 12% over the last two years.
- Zoopla predicts a continued upward trend but slower growth due to affordability issues, particularly in southern England.
In the UK, house prices have increased by 1.5% over the past year, according to Zoopla, primarily due to a more stable mortgage market and rising incomes. This growth significantly contrasts the previous year's much higher rate of 7.2% and indicates a changing landscape in the property market. Mortgage rates have stabilized, enabling most buyers to secure rates between 4 and 5 percent. Additionally, the average household income for both first-time buyers and existing homeowners has risen by 9 to 12% over the past two years, contributing to the improved affordability of homes and boosting buyer confidence. Despite the overall growth, the property market showcases a stark north-south divide within the UK. Notably, Northern Ireland recorded the highest price increase at 6.3%, while southern England experiences price growth of 1% or less, significantly hampered by ongoing affordability pressures. According to property experts, the anticipated growth in southern regions remains subdued, with predictions of just 2.5% annual increases in 2025. These regional disparities highlight the challenges faced by buyers in different parts of the country, exacerbating issues around housing affordability, particularly in the south. Looking ahead, Zoopla’s forecasts suggest a typical mortgage rate will hover around 4.25% for the average homebuyer throughout 2025. Lenders are also adopting stringent measures, ensuring that borrowers can manage potential future rate hikes by testing their capability to afford mortgages at rates as high as 8%. The perception of homes being overvalued contributes to the stagnation in price growth, especially in southern regions of the UK, where homes appear overvalued by 30% or more compared to other areas. In summary, while the property market shows signs of stabilization and modest growth, the varying experiences across regions reveal a complex interplay of factors influencing housing prices. With increasing buyer inquiries and sales agreed reported 19% higher than the previous year, the immediate future may see activity notably uplifted among first-time buyers, particularly in light of impending changes to stamp duty legislation set to take effect in April. Overall, the outlook remains cautious, as affordability continues to be a significant concern defining market trends in the UK.