How has the housing market changed in a post-pandemic world?

In January 2020 the average price of a home in Wales stood at just over £168,000. At the time this was some way behind the average price of a home across the UK, which stood at nearly £238,000.

However, the onset of the COVID-19 pandemic and its resulting raft of trends and changes has closed this gap. It included, among others, periods of volatile mortgage rates, a Stamp Duty holiday, and a “race for space” – a trend which saw buyers favour more rural, spacious areas.

Over this period to last December, the price of the average Welsh home rose by over 29%, according to Halifax, the UK’s largest mortgage provider. This was more than any other region in the UK.

Other countries in the UK reported strong growth too. The average home in Scotland and Northern Ireland added almost £31,000 and over £36,000 to their respective average prices in this period.

However, house prices are only part of the story.

Mortgage rates also play a significant role in determining affordability. Below, combining data unique to Moneyfacts and Halifax research, we’ve tracked how the housing market changed over the pandemic.

Before mentioning the COVID-19 pandemic, it is important to contextualise the performance of the housing market in the prior years.

Between January 2017 and December 2019, house prices grew by nearly 8% across the UK. This comes in contrast to the more than 20% growth seen across the pandemic period, according to Halifax.  

Mortgage rates, meanwhile, remained largely static.

Based on a mortgage of £200,000 over 25 years, the average two year fixed rate of 2.31% in January 2017 would cost just over £878 a month during the initial fixed period.

This rate increased to 2.44% in December 2019, meaning the same mortgage deal would increase to just over £891 a month.

Given that there were two Bank of England base rate increases in this period, you would be forgiven for thinking that these rates are somewhat linked to the central bank’s rises. However, the prices of fixed rate mortgages are also determined by other factors such as swap rates and gilt yields.

In fact, the average five year rate reduced during this period from 1.86% in January 2017 to 1.78% in December 2019.

In 2020 the COVID-19 pandemic hit the UK, and it changed demand for certain properties.

Halifax reports that demand began to increase for bigger properties in rural areas, especially as segments of workforce began working from home.

This became colloquially known as the “race for space”, and as a result demand for detached houses began to grow, according to Halifax.

In addition, demand was driven further as more homemovers could afford the switch following the Government’s Stamp Duty holiday.

In the three years between the start of 2020 and the end of 2022 the price of a detached home rose by nearly 26%, a high rise when compared to the near 9% increase seen in the three years to December 2019.

In December 2022, the average price of a detached home in the UK stood at just over £453,000, an increase of more than £93,000 since January 2020.

“Even if those values were to fall by 10%, they would still be around £50,000 more expensive than before the pandemic,” said Kim Kinnaird, Mortgages Director at Halifax.

While this increase, in conjunction with a rise in fixed rates over this period, may come as bad news for prospective buyers, there is a benefit for others.

Those who bought a detached home three years ago could find that a rise in house prices would increase the equity they hold in their home, said Eleanor Williams, Finance Expert at Moneyfacts.  

“This means that they could find that they have dropped down the loan-to-value brackets and therefore may be able to secure a more competitive, lower interest rate now,” she explained.

Of course, a lower rate on the right deal would revert to lower monthly payments.

“Anyone who may be considering a new mortgage deal would do well to seek independent advice to explore the different options available to them, so that they can make an educated choice,” Williams concluded.

While house prices have increased at a faster pace over the pandemic, new research suggests that this has begun to slow.

Zoopla found that currently sellers are having to accept a 4.5% discount on their asking price to achieve a sale. This equates to roughly £14,000, according to the real estate firm’s calculations.  

“Putting this discount into context, the average UK home grew in value by £42,000 over the pandemic, suggesting sellers are having to forgo, on average, 33% of their pandemic gains to achieve a sale,” it said in a report released on Tuesday.

Meanwhile, Nationwide BS’s research reinforces the idea that housing activity has slowed down. In the year to February, house prices declined by 1.1%, meaning they are at their weakest in over 10 years.  

“It will be hard for the market to regain much momentum in the near-term since economic headwinds look set to remain relatively strong,” said Robert Gardner, Chief Economist at Nationwide BS.

As for mortgage rates, the average Standard Variable Rate (SVR), two year fixed rate, and five year fixed rate still sit above their pre-pandemic counterparts in January 2020.

Moreover, while fixed rates have reduced in recent months, the average SVR has only increased.

The reduction in the Moneyfacts average fixed rate figures has been off an historically high base, when lenders repriced their mortgages to reflect the economic uncertainty which followed the mini-Budget.

SVRs, meanwhile, have increased following the Bank of England’s consecutive base rate increases, according to Rachel Springall, Finance Expert at Moneyfacts.

She explained that opting for a fixed or variable mortgage will depend on the borrower.

“It is down to the borrower on whether they should fix or stay, so it’s wise to seek advice to see if it is the right time to get a new deal,” she added.