UK house prices fell significantly in April, recording the biggest fall since last summer, as rising mortgage interest rates restricted the purchasing power of potential buyers.
According to Nationwide Bank, the main lending bank, house prices fell by 0.4 per cent last month, marking the second consecutive monthly decline and the largest decline recorded since August 2023. Despite this decline, prices are still marginally higher, at 0.6 in 100 above last year's level. Levels.
Robert Gardner, chief economist at Nationwide, attributes the slowdown to persistent pressures on affordability, driven by the recent increase in long-term interest rates, which reversed the significant decline seen at the start of the year.
The downturn in April caught economists by surprise, who had expected a modest 0.2 per cent rise in prices. Expectations were also exceeded for a slight decline in the annual inflation rate to 1.2 percent, as the March rate reached 1.6 percent.
Nationwide estimates that the average house price in the UK is £261,962, still around 4 per cent below the peak observed in the summer of 2022. However, potential buyers continue to face affordability challenges, especially as costs rise. Mortgage compared to 18 months ago.
The winter saw mortgage rates fall sharply, in anticipation of interest rate cuts from the Bank of England. However, uncertainty surrounding the timing of these cuts, amid persistent inflation and rising employment levels, has prompted lenders to raise rates in recent weeks. First-time buyers, in particular, face significant hurdles, with the average rate on a two-year fixed mortgage, with 95 per cent loan-to-value, topping 6 per cent for the first time since November.
Research conducted by Censuswide on behalf of Nationwide reveals that half of potential first-time buyers who planned to move in the last year have postponed their plans. Rising home prices, higher mortgage rates and additional home purchase costs were cited as primary reasons for the delay.
The impact of rising costs of living exacerbates the challenge, with many individuals unable to save the amount they had hoped to receive from a deposit. Most respondents had less than £10,000 saved, which is less than the £22,000 typically required for a 10 per cent deposit on a first-time buyer's home.
Imogen Pattison, associate economist at Capital Economics, expects affordability to improve in the coming months, which could lead to a rebound in house prices. However, they suggest that continued stability in mortgage rates is likely to keep demand weak in the near term. Pattison expects house prices to increase modestly, if interest rates are cut more than expected, potentially reaching 3 per cent year-on-year growth by the end of 2024.