Recent property price data shows a gradual upward trend in UK house prices, and a new data study has revealed that values could increase by as much as 6% by September next year should mortgages stay at their current rate.
Predicting whether property prices will rise or fall is far from a simple task, and many linked to the property sector who stepped into the spotlight during the first half of 2023 and proclaimed a significant retreat in prices are now a little quieter and perhaps hesitant about offering the opinions.
Our own prediction for the direction of UK house prices was based on a gut feeling, affordability, housing stock and demand. We felt a maximum fall of 5% was a safe assumption, and it seems we were not too far off from the mark. The latest data from Nationwide shows that current prices are now 2% lower than the same time last year, and the Halifax data shows them to be 3.2% lower than a year ago.
The upward trend in prices has been small and gradual over recent months, and Go.Compare the online insurance comparison giant has conducted its own research, which shows that this is likely to continue.
Its research shows that if mortgage rates remain at their current rate, house prices could increase by 5.92% by September 2024.[1] However, if mortgage rates waver, homeowners could be looking at either a dramatic increase or fall in the value of their houses.
Using the latest ONS house price data and the current APR rate of 5.3%, Go.Compare Home Insurance has calculated that homeowners can expect to see an increase of just under 6% in the value of their homes by autumn next year. However, a 1% increase to 6.3% would mean a 4.66% decrease in completion price value.
If mortgage rates fall another per cent to 4.3%, homeowners could see a huge 10.5% added to their house price. This would increase the average house price from £291,385.00 at the beginning of September 2023 to £321,968.00 just one year later – a rise of over £30,500.
If interest rates fall by one per cent, mortgage repayments would also become cheaper. The monthly repayments on the average house price next autumn would total £1,753 per month.[2] Whereas, if rates stay the same, monthly repayments will work out at £1,859, a difference of £106 every month. Interestingly, if rates rise to 6.3%, repayments would also drop to £1,841.
Ceri McMillan, home insurance expert at Go.Compare said, “With so much disruption in the housing market, homeowners are facing uncertainty over housing costs. Many are wondering how interest rates will affect the value of their homes as well as their monthly repayments, as many have seen a jump in their outgoings.
“While nothing is certain, our prediction aims to give homeowners and buyers an idea of what could happen to house prices next year. Our data shows that as mortgage rates rise and fall, this correlates to the completion value of homes. If mortgage rates continue to increase, homeowners may see lower completion prices.”
You can read more about Go.Compare house price predictions on their website.
About the Data
[1] A machine learning algorithm uses ONS data on average house prices over the last 12 months and the average mortgage rate at the time (5.3%, sourced on 15 November 2023) to define a correlation between the two data points. It then uses this data to produce a higher, lower and median range based on the three different mortgage rate figures.
Additional data on inflation, property availability and employment rates are not part of the calculation.
The ONS data is from September 2023 (the latest available) and details the average house price based on completions that month, not asking price data like other sources.
The average mortgage rate was sourced through a quote from Go.Compare Mortgages, using a 5-year fixed rate with a 10% deposit at the predicted value amount. This was sourced on 15 November 2023, giving an average APR of 5.30%.
[2] Monthly repayments were sourced from Google’s mortgage calculator on 16 November 2023, using predicted house prices and varying interest rates, with an assumed 25-year mortgage period.
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