House prices are on the rise – so why isn’t everyone happy?

Two years after Liz Truss’s mini-Budget caused lending rates to soar, the housing market is finally showing signs of recovery. Yet it’s not good news for everyone, says James Moore

Homesellers are now taking 60 days to find a buyer on average – longer than during the quiet point of the market last year (Getty)

Mortgage rates may be falling, but the latest data from property website Rightmove shows that people selling homes have responded by treating their asking prices to a double shot of espresso.

The average asking price on the site has jumped by £3,000 in just a month, coming in at an eye-popping £370,759. For the record, that is more than 10 times the average UK wage.

Now, average selling prices are considerably lower. We are not comparing like with like here, but it is worth noting that last month’s house price index from Halifax, the UK’s biggest lender, put the average price for August at £292,505, while Nationwide’s rival series put it at £265,375 in the same month. Which represents quite the gap.

But what is clear from all the available data is that the market is starting to move, and move higher. Quickly. Rightmove notes that September “usually sees a monthly rise in prices”. However, it adds that this year’s 0.8 per cent increase “is double the long-term average”.

Prices, it says, are being supported by increased activity. Buyers are getting busy now that mortgages are much more affordable than the nadir that was hit during the premiership of a certain Liz Truss (6.11 per cent for a five-year fix, more for a two-year deal).

For the record, the latest average as compiled by Moneyfacts comes in at 5.15 per cent for a five-year deal and 5.48 per cent for two. It is possible to find much better than that by shopping around, although it should be said that the best deals, which come in at nearer 4 per cent, tend to be based on relatively small loans compared to a home’s value. First-time buyers won’t see anything like that, unless the Bank of Mum and Dad is available to fund a big deposit.

Lower rates are still driving more sales, which Rightmove says were up by more than a quarter (27 per cent) compared with an admittedly subdued 2023.

Greed is motivating some sellers to get ahead of themselves, but they aren’t having it all their own way. It is taking them 60 days to find buyers, on average – three days longer than in the quiet market this time last year. Buyers are being smart and taking their time to find the right property at the right price – and haggling when they get there, too. This is a welcome sign, given how the market has behaved in the past.

I suspect another factor behind buyers’ relative caution is their reluctance to miss out on even better mortgage deals that may be available in a month or two’s time.

Base rates have only just started to move downwards. More cuts are expected. A fear of missing out on cheaper rates that may be coming is also affecting the remortgage market. Some homeowners are willing to sit on expensive variable rates as a result. Sellers need to be aware of these facts if they want to complete in reasonable time.

The City is not expecting the Bank of England’s rate-setting Monetary Policy Committee (MPC) to do buyers any favours this week (the decision is due on Thursday). But there is speculation that the US Federal Reserve – still yet to cut – may go big with a 0.5 per cent move this week, despite the political uproar this would provoke; Donald Trump and the Republicans would not be pleased.

The Bank of England’s governor Andrew Bailey has insisted that the MPC is not governed by anything the Fed does. However, central banks tend to move in packs, and a big cut by the Fed will be a point of discussion for the MPC.

The most important data point, however, will be August’s inflation rate, to be published by the Office for National Statistics on Wednesday.

Last time, the vote to cut was on a knife edge; it went 5-4 in favour. The MPC’s rate hawks remain to be convinced that the inflationary dragon has been slain, and that view is by no means unjustified. If the MPC is to move this month, I think inflation will have to come in below expectations.

Watch, in particular, the data on service prices – still rising relatively quickly – and on “core” inflation, which excludes volatile components (food, tobacco, energy). These two are arguably every bit as important as the headline rate.

As things stand, I think the Bank will wait until November to cut again. But the momentum is downward, particularly given the recent struggles of the UK economy, with GDP stalling for two months.

Fixed-rate deals are, of course, priced off the City’s interest rate swaps market, not base rates. But an early cut can be expected to move that market downward, and the big lenders will probably respond with alacrity. They want the business.

Trying to buy a house right now, nonetheless, remains a miserable experience. Sellers will inevitably respond to further cuts in rates by further pushing their asking prices up. For buyers, it’s a zero-sum game. Yet more evidence that the building boom promised by Labour – which will increase supply, if it is successful – can’t come soon enough.