UK house prices are continuing to grow as mortgage applications hit a 12-year high.
The average house price in September was £249,870 – a 1.6% rise from August.
According to Halifax, the market is surging as people are looking for more space following the lockdown. However, growth is not expected to continue. Due to the rising unemployment and impact of the recession, demand is expected to dampen.
The recent rise in house prices means that the average price of a home is now 7.3% more than a year earlier.
“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May,” said Russell Galley, the managing director of the lender Halifax.
“Across the last three months, we have received more mortgage applications from both first-time buyers and home movers than anytime since 2008.
“There has been a fundamental shift in demand from buyers brought about by the structural effects of increased homeworking and a desire for more space, while the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March,” he added.
The housing market ground to a halt over the lockdown and has since bounced back. Thanks to the temporary cut to stamp duty and built-up demand, the market has continued to grow since social distancing measures eased.
However, the demand is not expected to continue for long and house prices may decline over coming months. Galley said: “It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. And as employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.
“Therefore, while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly.”