This year's transactions set to be their highest for 14 years

The housing market is on track to record its strongest year since 2007 for transactions and house price inflation says Zoopla. 

The portal says an imbalance of supply and demand is continuing to support UK house price growth, which is currently running at 6.6 per cent with all countries and regions of the UK registering growth rates well ahead of the five-year annual average with the exception of London.

London is registering the lowest house price inflation - just 2.3 per cent and is the only region in the UK where growth is below the five-year average. By contrast, Wales is continuing to top the house price growth table, with current inflation tracking over 10 per cent.

The outlook for house price inflation and overall sales volumes is expected to be a balance of positive and negative influences in 2022.

With regards to 2022, as the UK emerges from the impact of the pandemic, housing transactions are expected to decline by 20 per cent from their high of 1.5m in 2021, to 1.2m in 2022.

House price growth is expected to be three per cent by the end of 2022 with the highest growth projected for the East Midlands and North West England while growth in London is projected to remain low at 2.0 per cent. 

Mortgage rates are likely to increase modestly in 2022 ending the year closer to 3.0 per cent, which would dampen demand for some buyers with mortgage rates still being low by historical standards. Any increase in mortgage rates is more likely to  impact sales volumes than prices.

By contrast, existing borrowers are more insulated from higher mortgage rates than they have been in the past and, even if they do go up, competition amongst lenders will remain intense. Over 80 per cent of mortgages are on fixed rates, many for five years or more, and stress testing has already ensured they can afford mortgage rates of 7.0 per cent - significantly higher than where the mortgage market is heading.

Richard Donnell, head of insight and research at Zoopla, comments: “2021 is set to be a record year for the housing market with the most moves by homeowners since 2007 and nearly £500 billion of home sales. The impact of the pandemic on the housing market has further to run but at a less frenetic pace. 

“We expect the momentum in the market to outweigh some emerging headwinds from higher living costs and the risk of higher mortgage rates. The latest data shows a turning point in the rate of house price growth, which we expect to slow quickly with average UK house prices up three per cent by the end of 2022.”