With a major cost of living crisis, high interest rates and fears of a looming recession, UK consumers are cutting back their spending to all but the most essential items. Even these goods and services - particularly food - have become more expensive due to record inflation.
For those looking to buy or sell a home, mortgages have become much more expensive since Liz Truss was Prime Minister. Her swathe of unfunded tax cuts spooked the markets, which unltimately led to pricer rates of interest for the loans.
However, in a wider context, the average cost of getting on the property ladder remains close to record highs. House prices rose steeply in the wake of the Covid-19 pandemic after the government introduced a stamp duty holiday for buyers.
It is likely prices are currently being supported by an increase to stamp duty thresholds announced by former Chancellor Kwasi Kwarteng - a measure which is effectively a tax cut.
What is the Rightmove House Price Index?
The Rightmove House Price Index (HPI) is a tracker of the UK housing market that’s run by one of the country’s biggest property websites.
It takes into account the asking prices of up to 200,000 homes being advertised by 13,000 estate agents UK-wide every month - although it excludes central London given Rightmove says the “normal housing ladder is not really applicable” there. Rightmove says this means its measurement covers 95% of the UK market.
The HPI differs from other key house price yardsticks, such as the Halifax HPI, in that it looks at home asking prices as they come to market. Other indices tend to look at prices later in the buying process, including at the mortgage application stage and final sales prices as listed with public body the Land Registry.
So, in essence, the Rightmove HPI’s strength is that it captures sellers’ sentiments closer to how they currently are. It breaks down asking prices into three different sectors:
- First-time buyers: Rightmove says the figure tends to cover properties that a first-time buyer would be more likely to consider, such as two-bed homes.
- ‘Second stepper’ (i.e. those moving out of their first home): covers three and four-bed properties, but excludes four-bed detached houses.
- Top of the ladder buyers: includes five-bed homes and above, as well as four-bed detached houses
What does latest Rightmove House Price Index show?
The latest Rightmove House Price Index was published on Monday (14 November). Covering properties put on sale between mid-October and early November, it showed house prices fell 1.1% compared to the previous month’s HPI.
It means the average UK house asking price has fallen by £4,159 to £366,999 - although this is still above the £365,173 recorded in August. While the monthly drop seems substantial, Rightmove says it is in line with its HPIs in previous Novembers.
The property website says falls of around 1.1% have been recorded in November in each of the pre-pandemic years between 2015 and 2019 as sellers try to make their prices more competitive in the run up to Christmas. Rightmove has also identified a trend of sellers whose properties have been on the market for a while being more willing to reduce their prices in order to get a deal.
But this has not been enough to halt a retraction in the first-time buyers’ market.
Rightmove’s director of property science Tim Bannister said: “The first-time buyer sector saw the biggest increase in activity during the market frenzy of the past two years, but is now facing the biggest challenges after the sudden jump in mortgage interest rates, though there are signs over the past few weeks that rates and availability are starting to settle down.”
He added: “The drop in buyer demand versus the strong market of last year is highest in the typical first-time buyer sector, with demand down by 26% on this time last year, though still up by 7% on this time in 2019.”