UK House price growth slows as rates rise

In January 2022, according to Russell Galley – managing director at Halifax, house prices grew by 0.3% month on month – the slowest recorded since June 2021. In addition to this, annual growth remained steady at 9.7% in January, possibly suggesting that the pandemic’s effects are slowing down as people settle back into a pre-Covid-19 routine.

However, house prices still continue to rise as Galley went on to say the average price of a UK home hit ‘a record of £276,759’ and ‘affordability remained at historically low levels.' This is an increase of around £24,500, over the year, and £37,500 more than it was just over 2 years ago. ‘Despite record levels of first-time buyers stepping onto the ladder last year, younger generations still face significant barriers to homeownership as deposit requirements remain challenging.' Young people are having to live more sparingly than the generations before them. The cost of living is becoming unaffordable to most as energy prices, food prices and housing prices all become overly expensive. Moreover, the Bank of England raised interest rates once again from 0.25% to 0.5% - the second time in three months – making borrowing more expensive. This could mean younger people are less likely to put down payments. As a result of all these factors, young people are locked out of the housing market. Furthermore, with Quantitative easing measures usually leading to lots of assets being eaten up by financial markets, a rise in the rate of interest will also mainly affect large financial institutions that invest in property, thus reducing demand for real estate.

Galley also said that ‘in the final four months of last year house price growth ran at more than 1% each month, before January’s dip.'

House prices did change drastically depending on where you are living in the UK. It went up by: 13.9% in Wales, 10.2% in Northern Ireland, 8.9% in Scotland, 12% in the North-West of England and 4.5% in London. Wales led the way in terms of the biggest national house price increase around the UK; whilst London recorded the lowest figure.

Martin Beck, the chief economic adviser to the EY ITEM Club, said the January slowdown ‘may be a sign of things to come.' He said ‘this year won’t see a boost to prices from the stamp duty holiday which ran through much of 2021. To the extent the tax holiday brought forward purchases, its after-effects may drag on housing market activity in the near term.'


Written by Chanel Enow

Research compiled by Billy Ryan


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