House price confidence remains high despite expectation of interest rate rises

05 October 2015

A sharp increase in the proportion of the British public who are expecting an interest rate rise in the next 12 months has failed to dent confidence in the outlook for house price growth, according to the quarterly Halifax Housing Market Confidence Tracker.

Continued talk over the likely timing of an interest rate rise has seen a spike in the number of people who expect both mortgage and savings rates to be higher in 12 months’ time. The latest Tracker shows 58% now believe mortgage interest rates will be higher in 12 months (compared to 48% in Q2), and 35% expect savings interest rates will be higher (up from 26% in Q2).

Alongside annual house price inflation running at 9% and the average house price standing at £204,674*, house price optimism (HPO**) remains high (+63 in Q3 from +64 in Q2), with 68% of Britons now expecting the average property prices to be higher in 12 months’ time and just 5% expecting it to be lower.

Buying vs Selling

There has been a further fall in the proportion of Britons who think it will be a good time to buy in 12 months’ time, from 56% in Q2 to 53% in Q3.

But despite the apparent stability in house price expectations, there has also been a drop in selling sentiment, with the proportion who believe the next 12 months will be a good time to sell, falling seven percentage points to 52% from 59% in Q2. This brings positive selling sentiment back down to the levels seen in early 2015 and it is now at its lowest level for a year.

Regional variations

Regionally, lower levels of people in London report a positive buying sentiment (just 40% said they thought the next 12 months would be a good time buy) compared to Scotland (77%) and North England (58%).

Conversely, in terms of positive selling sentiment, London sees 64% saying ‘the next 12 months will be a good time sell, compared to 48% in Scotland, 47% in North England and 43% in the Midlands.  

Craig McKinlay, Mortgage Director, Halifax said:

"While economic optimism appears to have tailed off in the last quarter, house prices have continued to increase and the underlying pace of house price growth is strong. This has helped to maintain the expectation that house prices will continue to rise, despite more people expecting interest rate rises in the next 12 months.

“The factors behind the upward pressure on house prices include the continued lack of second-hand properties for sale on the market and the availability of low mortgage rates. Without an increase in supply it’s likely to mean that house price growth continues to be robust in the short-term, even if interest rates eventually begin to increase.”

Barriers to homeownership

Raising a deposit is still seen as the number one barrier to buying property (57% mention this) despite the availability of higher loan to value mortgages and the Help to Buy Scheme.

The number of people citing job security as a barrier has fallen to its lowest ever level (42%) but it is still the second most mentioned factor, ahead of household finances (36%).

Despite the continued rise in house prices, the percentage citing rising prices or prices being too high has fallen from 35% to 31% in the last three months.

And despite the swing in terms of people expecting to see an interest rate rise in the next 12 months, the percentage of people who cite concerns about interest rates rises as a barrier is little changed – it is currently 14% in compared to 16% in Q2.