Housing market holds up well despite Bank of England rate hikes

The UK property market is still running hot despite the Bank of England’s rapid interest rate hike cycle, according to research by Morning Wire

House purchases dipped around four per cent in June compared to December when the Bank’s first rate rise landed, dropping to 95,420 from 99,560, according to HMRC data.

Governor Andrew Bailey and co have lifted rates 165 basis points since in around nine months, taking them to 1.75 per cent, the highest level since December 2008.

Those rate hikes have been passed on by banks through charging more for mortgages, which typically cools demand for homes by squeezing affordability.

The average rate on a five-year mortgage has climbed 10 months in a row to 4.08 per cent this month, the highest level in nearly eight years, according to data provider Moneyfacts.

The number of products available to would-be buyers has also fallen sharply to 4,400 this month from 5,315 last December, when the first rate rise landed.

“This reflects the speed at which providers are updating their offerings, but also means that those looking for a new mortgage have the shortest length of time we have ever recorded to try to secure their deal of choice,” Eleanor Williams, finance expert at Moneyfacts, said.

The impact of the Bank’s 50 basis point rate rise, the largest in nearly 30 years, last week has yet to feed through to official data.

But, those rate rises are beginning to put downward pressure on house price growth. Prices jumped 0.1 per cent over the last month, according to Nationwide, but this was partly driven by prices soaring last June as prospective buyers rushed to lock-in savings from the stamp duty holiday.

Economists have warned that the cost of living crisis will also crimp housing demand by poisoning household finances. Inflation is running at a 40-year high.