House prices have reached a new record high, but there are signs of a downturn

The latest Halifax house price index is showing the highest level of growth since June 2016, but the housing market is showing early signs of cooling

house prices
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Continuing a trend that no longer surprises anyone, UK house prices have reached yet another record high. The latest Halifax House Price Index reveals that average house price is now £250,457 – a 7.5 per cent increase from last year, and the highest rate of increase since June 2016. 

While this sky-high house price inflation has surprised some property experts, it did not really come out of the blue. A combination of factors – low mortgage rates, a stamp duty holiday, and months of lockdown that had made buying a house impossible – have created a temporarily auspicious environment for house movers in particular, and it will be some time before this activity subsides. 

However, there are signs that this winding down has already begun, albeit in a small way. The month-on-month house price growth was 0.3 per cent in October, in marked contrast with the 1.5 per cent seen in September. As of now, there's no up-to-date data on mortgage approvals beyond September, and it will be interesting to see whether mortgage approval rates will begin falling as the numbers of the most eligible applicants – second- and third-steppers – begin to reduce. In any case, as  Russell Galley, Managing Director of Halifax, points out, it's far from clear what the economic impact of coronavirus will be in 2021:

'While Government support measures have undoubtedly helped to delay the expected downturn in the housing market, they will not continue indefinitely and, as we move through autumn and into winter, the macroeconomic landscape in the UK remains highly uncertain. 

'Though the renewed lockdown is set to be less restrictive than earlier this year, it bears out that the country’s struggle with COVID-19 is far from over. With a number of clear headwinds facing the housing market, we expect to see greater downward pressure on house prices as we move into 2021.'

So, putting aside the headline-grabbing annual house price growth, the very modest month-on-month house price growth is likely an early sign of things to come – a subdued property market next year, with house prices likely falling after the end of the stamp duty holiday in March. 

And while an overall economic downturn won't be welcomed by anyone, a slowing down of the property market will no doubt help at least some first-time buyers finally secure their first home. If you're already looking for a mortgage, use Habito's free mortgage comparison tool below to help you get stated.