The report appears to reassure those fearing a market crash and, although it admits that some risks still remain, all indications are that the market is cooling gradually.
In May, house prices increased by 0.3 per cent, continuing the trend witnessed since the beginning of the year. This is in stark contrast to last year when the average increase was 1.7 per cent.
The price of a typical property increased by £8,252 in the 12 months to May and now stands at £157,272.
In addition, the annual rate of house price inflation fell to its lowest level since August 1996, dropping from 7 per cent to just 5.5 percent.
Nationwide’s group economist Fionnuala Earley said: “The biggest change in sentiment during the month centres on interest rates. The decision to leave them on hold is clearly good news for the housing market where deteriorating affordability has held back first-time buyers and there are worries about higher sensitivity to interest rates due to higher levels of household debt.”
Rob Clifford, managing director of Mortgageforce, supported Nationwide’s prognosis. “The prophets of doom are always wrong about the risks. The figures go to show that property, on balance, remains a good investment but is best played long-term,” he said.
However, Mehrdad Yousefi, head of mortgages at Alliance & Leicester, expressed some reservations. He said: “I think all indications are that the market is heading for a soft landing but it’s really too early to make a judgement. More figures should be released in July.”
