Surge in house prices in the UK as the average house cost soars


You won’t be surprised to hear that house prices in the UK have risen yet again. In fact, the UK price index shows homes are at an all-time high as of June 2022, with the average cost of buying a home in the UK coming in slightly under £300,000.

After the home buying rush of 2021, there’s now an imparity between supply and demand. It’s estimated that 9 out of 10 house hunters have had their search affected by a lack of available properties. Rightmove’s house price index shows that the rate at which homes are being snapped up has rapidly increased, with properties being sold so quickly, buyers are entering into bidding battles resulting in properties being sold for thousands of pounds over the listed price. This directly contributes to the overall increases as well as other factors.

Why does it keep going up?

It’s no secret that house prices have been on the up for years, with Covid, redundancies and reduced housing development all contributing factors. The best way to explain the increase trends is to look at a timeline of key events and the effect these have had on the housing market.

January – December 2019

Before Covid changed the way we work and live. House prices had been following a steady incline for some years, but this didn’t deter buyers. With various schemes introduced to help first-time buyers get on to the ladder and others investing in properties to renovate and let. It seemed to be working well. Although buying a home was not to be taken lightly. The deposit alone, mortgage rates and cost of living all had to be carefully considered before fully committing. After all, owning and maintaining a home isn’t cheap (and that was then).

March 2020

Locked down indefinitely with uncertain rules, Covid caused disruption to all areas of our lives; weddings, holidays, work, social gatherings and, of course, any plans to buy or sell a house. The country came to a halt. During this time, house prices fell to their lowest point since 2011 and the total number of sales per month also dropped to a historic low.

July 2020

The government introduced a temporary stamp duty ‘holiday’ in an attempt to get the property market moving again after the first lockdown – a welcome move for those who benefitted!

The stamp duty cut and the end of Covid-19 lockdowns meant that many people moved house sooner than they otherwise would have done, resulting in transactions peaking at nearly 200,000 in June 2020 – double the figure you would see in a ‘normal’ year.

Ultimately, this then led to a lack of available homes on the market and prevented prices from falling, which kept the market steady as 2021 began. On a brighter note, this also meant an end to the delays in mortgage approvals, and slowed down moves to a more manageable pace.

September 2021 

With Covid vaccination rolled out and restrictions largely lifted, there was a boom in many areas of the economy, especially the housing market. “homes that look like the last turkey in the Christmas shop window are flying off the shelves at the moment”, said estate agent Henry Pryor in an interview with the Guardian (Sep 2021).

Below, a line graph from Rightmove shows that in September 2020, the average number of days a house would be on the market was 54; by September 2021, the average on-the-market time was just 36 days.

With some predicting the housing demand and price boom to continue to accelerate for years to come, there were many more factors at play during this time. Such as, the furlough scheme which was set to end September 30th – likely to leave many more people unemployed, which would in turn affect the number of people buying houses.

On the flip side, the situation made it more appealing for private landlords to sell homes, with the attractive higher value they could fetch. But the supply and demand surge forges on even now, nine months later.

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What could all this mean for house buyers in 2022?

The EY Item Club, an economic forecasting group, is predicting house prices will end this year than they were at the end of 2021. Speaking to The Guardian, the group said that stretched affordability was likely to slow the rate of house price growth, but at the same time rising interest rates, a shortage of available homes on the market, and falling household incomes would stop prices from falling as much as they might have otherwise done.

The Club also predicts that an average UK home would be 23% higher in price by the end of 2022 than Q1 of 2020 (pre-pandemic), where the average at that time was £231,000.

Which? Reports that with the rise in house prices has resulted in first-time buyers needing to take on longer mortgages. While 25-year mortgage terms were once standard, we’re now seeing 35-year and even 40-year mortgages becoming more common.  Their recommendation? If you are considering applying for a mortgage in 2022, speak to a mortgage broker on term lengths and options.

Fewer people buying homes should mean a calmer mortgage market, with more activity likely to come from existing homeowners re-mortgaging and less from new people buying homes.

days to sell a home graph rightmove house price index
Avg. days on the market, Rightmove house price index

‘Green’ mortgages will become more mainstream

Sustainable borrowing is of growing importance to consumers, and 2022 could be a breakthrough year for ‘green’ mortgages. Green mortgages usually offer cheaper rates when you buy a property that offers high energy-efficiency (for example with an A or B Energy Performance Certificate rating).

These types of mortgages are useful for people buying new-build homes, but not so much for those buying older, less well-insulated properties. With that in mind, some lenders have launched mortgages that offer cheaper rates or cashback when the borrower makes energy-efficient improvements to their home. All in all, the green mortgage market is still relatively small, but we expect to see it grow significantly in 2022.


Norton info graphic house prices 2022

Impact on selling/letting in 2022


It’s being reported that fewer property sales are likely to go through in 2022 due to increased demand and affordability issues; there’s speculation that more people will stay put and renovate their homes instead. In 2021, there was an increase in the number of borrowers re-mortgaging to borrow more, allowing them to invest in home improvements without significantly increasing their monthly outgoings.

A Which? study in 2021 found that those looking to remortgage and renovate said their improvements would be limited to 33% painting and decorating, with 20% planning to remodel their gardens. A further 18% of homeowners said they would be improving their kitchen.

If you’re a landlord looking to increase rental income on your properties, areas where renovations generate the most yield are; kitchen, flooring, exterior (curb appeal) and the bathrooms. Always make sure your home(s) are adequately covered as if you’ve extended or invested money in refurbishment resulting in higher property value, you’ll need to let your insurers know.

Low mortgage rates have made additional borrowing cheaper than taking out a personal loan, and some banks offer better rates for customers who undertake home improvements. Even if mortgage rates rise, you could still expect to see lenders continue to offer preferential deals to existing customers who plan to renovate their properties.

percentage house increase over 10 yrs graphic

The bigger picture


House prices have been increasing for a long time – this isn’t a recent observation. In 2010, the average price of a house in the UK was £167,888. By 2015 it had increased by 13.66%. Compare this to the next 5 years, and by 2020 the average price had increased by 20.84% to £230,609.

To put this rise into perspective, in the last two years there’s already been a 19.94% rise in average cost of a property since 2020: the current average price of a buying a home in the UK is £276,609.

If this rate of increase continues, prospective buyers are very likely to be priced out of the market, resulting in higher rental demand and the price of housing remaining at a high level due to lower turnover. But if we’ve learned anything in the past two years, it’s that the situation can change quickly.

Whether you’re looking to buy, sell, or stay put and consider your options, it’s worth getting the right advice from a qualified professional before either investing or parting with an asset.

For information or to speak with one of our personal client managers, see our home insurance page below. 

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