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UK house prices: Halifax and Barratt warn of challenges ahead

The average prices of UK homes climbed again in August, although the rate of annual growth slowed, as the country’s largest lender warned of a “more challenging period” ahead for house prices amid rising interest rates and the cost of living squeeze.

The average price of a home was £294,260 in August, 0.4% higher than the previous month, and marked another record high, according to Halifax.

It called the monthly rise “relatively modest” compared with the rapid house price inflation that has been seen in recent times, where the average monthly increase in house prices has been 0.9%.

The August increase marked a return to growth for house prices, after they fell in July for the first time in more than a year. The annual rate of house price growth dropped slightly, to 11.5% from 11.8% in July – the lowest level in three months.

The country’s biggest housebuilder, Barratt Developments, provided further evidence on Wednesday of a slowdown in the housing market, saying the number of homes reserved each week until the end of August had fallen below the level of a year earlier, and was now lower than before the coronavirus pandemic.

Releasing its annual results to investors, Barratt said this was related to limited supply of homes, combined with “heightened macroeconomic uncertainty”, adding that it expects house price growth to moderate.

Despite the gloomier outlook, the builder celebrated bumper earnings from the recent housing market boom, reporting pre-tax profits above £1bn for the first time.

It came a day after the London-focused developer Berkeley signalled it was adapting its behaviour to deal with worsening economic conditions, saying it would hold back in buying more land, only doing so “very selectively”.

The Bank of England announced its biggest increase in interest rates in 27 years in early August, taking the UK base rate to 1.75% – a 13-year high – in an attempt to rein in inflation as gas prices drive up UK energy bills. The central bank’s monetary policy committee will next reassess interest rates in mid-September, and it is expected to continue raising rates into next year.

“House prices have so far proved to be resilient in the face of growing economic uncertainty,” said Kim Kinnaird, the director of Halifax mortgages.

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