HOUSE prices have hit a record high, despite recent turmoil in the mortgage market.
The average asking price on a property hit £371,158 in October, according to Rightmove.
That' s an increase of 0.9%, or £3,398, on September and a 7.8% increase on the same time last year.
The property website said shortages of property for sale continue to underpin prices.
And the impact of the mini Budget which has pushed up mortgage rates has yet to be reflected in the property market.
There was little sign of downwards price pressure on existing properties for sale, with the number of reductions up 2% on last month to 23% of all properties reduced.
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That's below the pre-pandemic five-year average of 32%.
Demand fell by 15% over the past two weeks compared with the same time last year.
But that's still 20% higher than during normal market conditions before Covid in 2019.
The rapid rise in average mortgage interest rates in recent weeks has caused some potential home movers to pause their plans and wait to see what happens.
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Surging mortgage costs could push down house prices in the year ahead, according to surveyors.
And economists previously warned that house prices could plunge by as much as 15% next year.
Tim Bannister Rightmove’s director of property science said: "What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget.
"There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues.
"New sellers coming to market in the month have been pricing strongly, and the number of homes that were already on the market seeing a reduction in price is still well below the long-term average.
"It will take a bit of time for the market to settle in to a new, more ‘normal’ level of activity following over two years of market frenzy, especially with new developments happening almost daily at the moment."
According to Rightmove, it is likely that asking prices will drop in November and December as they normally do.
The property website says it will be important to separate these seasonal price changes from market changes caused by other factors.
Rightmove says it appears that first-time buyers have been the hardest hit, as higher rates may be a step too far for those who were already stretching their wallets.
Demand in the first-time buyer sector is down by 21% in the last two weeks compared to the same two weeks last year, though it is still up 24% compared to the more normal market of 2019.
Those who have already agreed their purchase are not backing out.
Only 3.1% of sales agreed have fallen through in the two weeks since the mini Budget, which is in line with the 3% over the same two weeks during 2019.
Tim added: "The vast majority of buyers who had already agreed their purchase are still going ahead.
"Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rises, and now face a difficult situation with rents also rising, and a shortage of available homes to rent.
"Buyer demand was already starting to soften and higher interest rates were anticipated, but they’ve been brought forward sharply due to market uncertainties.
"Agents report that many of those who managed to secure a mortgage offer at a lower rate before lenders quickly increased them are now rushing through their agreed deal to avoid their offer expiring and facing a higher rate when they come to reapply.
"It’s understandable that some new movers who have the option to wait, may want a clearer view than they’re getting right now before they proceed with a major purchase such as a home.
"With uncertainty over where mortgage interest rates will go, those who can still afford to proceed may decide that waiting too long could come at an even higher cost than taking action to move now, especially if the level of demand continues to outstrip supply and supports prices.”
What's happening to mortgages?
Mortgage rates were already rising due to soaring inflation and frequent rises to the Bank of England's base rate.
The BoE raised interest rates by half a percentage point to 2.25% for the seventh time in a row at the end of September.
An increase to the base rate of interest makes borrowing more expensive as banks then raise interest rates for customers, including on mortgages.
A swathe of unfunded tax cuts promised in the mini Budget spooked the market, with lenders withdrawing mortgage products from sale.
At the same time, a plummeting pound fuelled concerns of more Bank of England rate hikes.
Average home loan rates now sit above 6% on two-year and five-year fixed deals for the first time in 14 years — and experts say there are likely to be further increases.
How does this affect house prices?
As homeowners will have to fork out thousands of pounds extra a year to pay their mortgage if interest rates continue to rise — many could be put off moving.
A fall in demand tends to lead to a natural fall in house prices.
So it can bad news for sellers as they could be forced into lowering their asking prices if demand falls.
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Last week experts said “storm clouds are visible” in the housing market, as the average two-year mortgage rate has hit 6.46%.
It came after house prices fell by 0.1% in September, according to figures from Halifax's September House Price Index.
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