UK house price growth has slowed to a low level, with higher mortgage rates and costs weighing on the market.
The slowdown affects most people with a stake in housing: buyers trying to borrow, sellers hoping for a certain price, and homeowners whose current mortgage deal is coming to an end.
The slowdown
House price growth measures how much average prices have changed over a set period, often compared with the same point a year earlier. When growth is low, the average home is gaining little in value over that time. Price indices are built from sources such as mortgage approvals and completed sales, so they tend to show a shift in the market after it has started.
Averages also hide a lot. Prices vary between towns, regions and types of property, so the experience of an individual buyer or seller can look quite different from the national picture.
The mortgage link
Most of us buy a home with a mortgage, so the cost of borrowing has a direct effect on what we can afford. A mortgage rate is the interest a lender charges on the money borrowed. When rates rise, the monthly repayment on the same loan goes up.
Lenders also check that a borrower could cope with the payments, which means higher rates can reduce the amount someone is able to borrow. A buyer who could stretch to a certain price at a lower rate may have to look at cheaper homes, or wait. When enough buyers do that, demand cools and sellers have less room to push prices up.
Many borrowers are on fixed-rate deals, where the interest rate stays the same for an agreed period, commonly two or five years. When that period ends, the loan usually moves to the lender's standard variable rate unless the borrower arranges a new deal, known as remortgaging. That is the point at which a rise in market rates can hit household budgets.
The outlook for buyers and homeowners
Future price movements will depend heavily on where mortgage costs go from here.
For homeowners, the practical step is to check when your current deal ends and what rate you would move to. Many lenders let you secure a new deal months before the old one expires. A mortgage broker or your lender can explain the options, and it helps to organise your paperwork before you apply.
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