UK house price index defies odds as mortgage rates ease

UK house prices dropped at a slower pace than expected in March signaling that the British economy is doing fine. Data published by Halifax showed that the average house price rose by 0.8% in March after growing by 1.2% in the previous month. Economists were expecting the data to show that prices dipped by 0.3%.

UK house prices steady

UK house prices rose by 1.6% on a year-on-year basis, which was also better than the expected increase of 0.3%. Prices had previously increased by 2.1% in February. In all, the average house price in the UK is costing £287k, which is higher than £285,660 in February of 2022. In a statement, Kim Kinnaird of Halifax said:

“The principal factor behind this improved picture has been an easing of mortgage rates. The sudden spike in borrowing costs that we saw in November and December has now been largely reversed, and while rates remain much higher than the average of the last decade, across the industry a typical five-year fixed rate deal (75% LTV) is down by more than 100 basis points over the last few months.”

The estimate by Halifax is different from another report by Nationwide. In a report published last week, Nationwide said that the house price index dropped by 3.1% year-on-year in March, the biggest decline since 2009. Its report said that buyers were concerned about the rising cost of living and the fact that mortgage rates remain much higher than in the past. In its report, Nationwide said:

“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.”

UK housebuilder shares are rising

Economists believe that the UK economy is holding better than expected. This explains why the GBP/USD pair has risen by double digits from its lowest level in 2022. Similarly, the FTSE 100 index has jumped to a record high, as we wrote here. 

UK housebuilder stocks have also done well in the past few months. Taylor Wimpey’s share price has jumped by 40% from the lowest point in October. Similarly, Barratt Development stocks have risen by 44% from its October low. Persimmon shares are the worst-performing in the housebuilding sector.