Halifax warns rate cuts may raise house prices
- Halifax, a mortgage lender, has warned that lower borrowing costs may lead to a modest increase in house prices.
- The lender suggests that rate cuts could stimulate the housing market further.
- This outlook raises concerns about affordability for potential homebuyers.
Halifax has indicated that a decline in mortgage costs and potential interest rate cuts could lead to an increase in house prices for the remainder of the year. Amanda Bryden, head of mortgages at Halifax, described recent mortgage rate reductions as "encouraging" for first-time buyers and those refinancing. Following the Bank of England's recent decision to lower interest rates to 5%, the first cut since March 2020, Bryden anticipates a modest upward trend in house prices, despite the governor's caution against expecting rapid further reductions. The past two and a half years of higher interest rates have strained household finances, although savers have seen improved returns. Current mortgage rates, while lower than before, remain significantly higher than those from a few years ago. As of Wednesday, the average two-year fixed mortgage rate stood at 5.74%, with the typical five-year deal at 5.36%. In July, the average property price in the UK rose to £291,268, marking an increase of over £2,200 from the previous month. Northern Ireland has reported the highest house price growth in the UK, with an annual increase of 5.8%. Financial planner Holly Tomlinson noted that the housing market could "start to heat up" following the Bank of England's rate cut, potentially boosting demand for homes. However, while rising house prices benefit current homeowners, they pose challenges for first-time buyers trying to enter the market, especially as recent competitive rates from lenders like HSBC and Barclays are primarily available to those with substantial deposits.