Saturday, September 25, 2021

House Price Inflation Highest since 2007

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According to the latest figures from Halifax, house prices have jumped £2,500 in July, despite reports that the number of mortgage lendings is beginning to slow down.

Fast rising inflation has pushed house prices to a level where they are as expensive, in relation to earnings, as they were at the peak of the late 1980s boom, according to the index by Britain’s biggest mortgage lenders.

The report arrives in the midst of a slightly difficult situation for the property market as stringent new mortgage rules have made it more difficult for borrowers to secure home loans, whilst surveys suggest that the property market outside of the London property price bubble is beginning to gather a head of steam.

The cost of an average home is now £186,3222, according to Halifax, up £17,261 on the price from the same time 12 months ago.


The Halifax index showed a 1.4 per cent jump in house prices in July, and whilst the bank warned against reading too much into traditionally volatile monthly figures, momentum accelerated across all of the lending agent’s measures last month.

The change in house prices quarterly jumped from 2.3 per cent to 3.6 per cent, annual inflation rose 1.4 per cent, to 10.2 per cent from June to July, and the price-to-earnings ratio, which pits the average full time male salary against average property values rose from 4.96 to 5.02.

Halifax utilises the ONS’ average full time male salary for its price to earnings ratio, which currently sits at £37,152. This is a significantly higher figure than the median which the ONS give for all full time employees – £27,017.


The significant jump in Halifax’s average house price figures stand in stark contrast with those of Nationwide, which showed the market slowing with property moving ahead only 0.1 per cent. However, both lenders’ reports are founded on their own mortgage data, and so therefore have the potential to reflect their own different lending criteria.

The slowdown in the property market is not unexpected however, with April seeing the introduction of the Mortgage Market Review (MMR), which places more stringent checks on borrowers’ ability to afford mortgages and requires lenders to stress test against standard mortgage rates of around 6 per cent.

The effects of these measures appear to be primarily felt in London and the commuter belt, however, where prices have been seeing a rise for some time, whilst the rest of the country remains relatively subdued.

ONS’ latest house price index showed London prices up 20.1 per cent, while the overall figure for the UK was 11 per cent and excluding London and the South East it was 6.4 per cent.


Rupert Snowden of Innovo Property,explained why he thinks that the inflation is coming to an end.

“The inflation we are seeing at the moment is certainly not something that will be around for the long term,” he said.

“The bubble in London is greatly exaggerating the average price of UK properties, and once the market in the capital begins to cool down, we will see a return to more steady and normal rates of inflation.

“We expect to see this happening towards the final months of 2014 and the beginning of 2015, so the way we see it there is really nothing to worry about.”

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Peter Black
Freelance blogger, main interests being real estate, property investment and green investments. studied in London, live in London, born in London. Chelsea fan!

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