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UK house prices rise for third month in a row amid interest rate cut hopes

UK house prices Victorian semi-detached houses in the suburb of Chorlton, Manchester, recede into the distance below a blue sky with a few clouds. Anna Watson/Alamy
UK house prices rose in November by 0.2%.Photo: Anna Watson/Alamy (Anna Watson)

UK house prices rose in November in the third consecutive monthly increase as the market now expects interest rates to start coming down.

The average cost of a home rose 0.2% in November from the month earlier to £258,557, Nationwide Building Society said. From a year ago, prices fell 2%, which was the strongest reading in nine months.

Nationwide’s chief economist Robert Gardner said the changes were a result of an improved outlook for interest rates next year.

“There has been a significant change in market expectations for the future path of bank rate in recent months which, if sustained, could provide much needed support for housing market activity.

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Read more: Interest rates blamed for plunging property transactions as UK housing market cools

“In mid-August, investors had expected the Bank of England to raise rates to a peak of around 6% and lower them only modestly (to c.4%) over the next five years.

"By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead.

Analysts had expects prices to fall 0.4% in November. This means the annual fall in house prices reduced from 3.3% to 2%.

Nathan Emery, CEO of Propertymark, said: "While there are indications a turning point maybe on the horizon, the dust needs to fully settle and we must remain prudent.

"Andrew Bailey, Bank of England governor, recently suggested there will be no quick drops in base rate for the foreseeable future to keep inflation in check – so ultimately the pressure will remain on many households for a while longer yet."

The housing market is benefitting from the drop in UK inflation, which is leading several lenders to lower mortgage rates.

Alice Haine, personal finance analyst at DIY investment platform Bestinvest, said: With inflation on the retreat and expectations that interest rates may have finally peaked, mortgage rates have eased back since the highs seen in July.

"It means borrowers now have more choice with more fixed term deals under 5% available along with better incentives such as refunds on valuation or legal fees as mortgage wars heat up between lenders.

Read more: Property: 9 homes perfect for socialising

"Better deals certainly offer hope to first-time buyers that their dream of property ownership may finally become a reality," she added.

Mortgage brokers have said a battle to offer the lowest mortgage rates to buyers is behind the boost in house prices.

Emma Jones, managing director at Whenthebanksaysno.co.uk, said: "With lenders now competing ferociously for business and cutting mortgage rates across the board, there may, just may, be some light at the end of the tunnel.

"It’s starting to feel like we have turned a corner. 2024 is shaping up to be a far more promising year than 2023 for the UK property market."

Watch: First-time buyers baffled by mortgage jargon like negative equity and stamp duty

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