What’s going on here?
British house prices took off in July, rising at their fastest rate since January.
What does this mean?
UK house prices were 0.8% higher in July than June, a welcome change after three relatively flat months and more than the expected 0.3% rise. That’s down to potential buyers feeling encouraged by the recent fall in mortgage rates, as well as the Bank of England’s interest rate cut last week – especially as it looks increasingly likely that the country will see two more cuts this year. But making a house a home still isn’t cheap: the average first-time buyer spends around 37% of their pay on mortgage payments, up from around 28% back before the pandemic.
Why should I care?
For markets: Cheap as chips.
British stocks had been out of fashion for months, with traders sidelining them despite their relatively cheap prices. Then only recently, hopes of increased political stability had brought institutional investors around, and the UK’s finest were finally coasting upward – until the recent market panic, that is. Now, plenty of investors could see this as a chance to nab a bargain. After all, British inflation seems tame, rate cuts are underway, and the economy’s plodding along. Plus, lower rates make storing investable cash in savings accounts that touch less lucrative.
Source: Google Finance
For you personally: Two sides to every story…
Lower interest rates can be a double-edged sword for housing. They make it cheaper to borrow money, like a mortgage. But because that brings sidelined buyers out of their rented flats, the newfound attention can push house prices higher. In fact, a lack of affordable housing is a serious issue in the UK, so much so that the newly elected government’s plans include policies to build new homes. If that pans out, house prices might be kept at a manageable level – but that relies on political promises coming good.
