According to a building society, UK house prices saw a resurgence in May, demonstrating market «resilience» following two months of decline.
Nationwide reported that the average property price in Britain increased by 0.4% month-on-month to £264,249, recovering from a 0.4% drop in April.
Nationwide said: “The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months.”
The annual growth rate surged to 1.3% in May, up from 0.6% in April, following slight increases in mortgage rates since the beginning of the year that had slowed the housing market in March and April.
Moneyfacts reported that the average cost of a two-year fixed-rate mortgage rose from 5.56% at the end of January to 5.92% by the end of May. Data released by the Bank of England on Friday showed steady housing market activity in April, with 61,100 new mortgages approved, almost unchanged from March. However, the number of remortgages dropped from 33,500 to 29,900 during the same period.
The Bank’s data also indicated that mortgage borrowing increased by a net £2.4 bn in April, up from a net increase of £500m in March. This April figure was 0.2% higher than the previous year, marking the first positive reading since October 2022. The «effective» interest rate on newly drawn mortgages was slightly higher in April than in March, at 4.74%.
Experts anticipate that the Bank of England might cut interest rates in August or September due to cooling inflation. The headline inflation rate dropped to 2.3% in the 12 months to April 2024, down from 3.2% in the 12 months to March.
Gardner noted, «Consumer confidence has significantly increased in recent months, bolstered by strong wage growth and decreasing inflation.”
This week, a separate index from property website Zoopla revealed that Britain’s housing supply is at its highest in eight years, a trend experts believe will limit house price increases for the rest of 2024. Meanwhile, Nationwide’s research indicated that the upcoming general election is unlikely to significantly impact house prices, as previous elections have not altered underlying market trends, with buyers continuing their transactions despite political events.
Andrew Wishart, an analyst at Capital Economics, noted that despite the small increase reported by Nationwide, the broader picture shows that rising mortgage rates in recent months have caused house prices to stagnate. «Looking at the overall trend, house prices have been stable for the past year and a half, with the slight increase in May bringing them back to their January 2023 level,» he said.