"A lot rides on the Bank of England’s actions over the coming months"
UK house prices fell by 0.4% to an average of £261,962 in April, with annual growth rate slowing down to 0.6% from 1.6% in March, Nationwide has reported.
“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year,” said Robert Gardner, chief economist at Nationwide Building Society. “House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.”
Recent research by Censuswide for Nationwide indicates that nearly half, or 49%, of potential first-time buyers, those aiming to purchase within the next five years, have postponed their buying plans over the past year. High house prices were cited as the primary deterrent by 53% of respondents, while 41% attributed their delay to elevated mortgage costs.
Nationwide, in its latest house price index, said the cost of living has also impacted 84% of these buyers, affecting their ability to save for a deposit. About two thirds, or 67%, of prospective buyers have less than £10,000 saved, with current average deposit requirements for a typical first-time buyer property around £22,000.
More than half, or 55%, of these potential buyers are considering relocating to more affordable areas or where they could secure a larger property, with half willing to move over 30 miles from their current location.
The tendency to compromise is evident among recent first-time buyers as well, with 38% settling for less than their ideal property, while nearly 40% purchased homes needing renovations and 34% bought properties in different areas to manage costs and expectations.
“There is still positive sentiment from buyers, and we are seeing viewing activity increase, signalling stability in the housing market,” commented Sam Mitchell, chief executive of estate agent Purplebricks.
“While several banks have slightly increased mortgage rates, there has also been an increase in new market offerings, both have sparked buyers into action which has resulted in more sales. The Bank of England has just announced mortgage approvals are at an all-time high and people will want to capitalise on this.”
Kate Steere, property expert at personal finance comparison site finder.com, however, said that uncertainty around when the Bank of England will cut rates and by how much has dampened demand.
“Buyers are still struggling with affordability issues and several big lenders have increased their rates in the past week,” she added. “It’s clear the market is still adjusting to the end of ultra-low mortgage deals, with millions of borrowers due to remortgage this year.
“Buyer demand remains subdued and, as a result, house prices have dipped slightly. A lot rides on the Bank of England’s actions over the coming months. However, half of experts believe we will have to wait a bit longer before we see rates cut.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said there would likely be ups and downs in mortgage pricing in the weeks and months ahead, but ultimately, borrowers would have to get used to paying more for their mortgages as the days of rock-bottom rates have long gone.
“First-time buyers, in particular, are finding it difficult to raise deposits and are relying on the Bank of Mum and Dad more than ever to buy, particularly in London,” Harris stated. “With an interest rate reduction on the horizon, perhaps as early as the summer, this will give the market a welcome boost.”
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