The UK’s housing market was rather quiet in March, and house prices drop slightly since last month, influenced by high mortgage rates, as reported by Nationwide building society.
This marks the first decrease in house prices within a three-month span, following increases of 0.7% in the two months prior.
The average cost of a home went down by 0.2% from February to March, amounting to £261,142, after an adjustment for seasonal patterns.
Nevertheless, even after March’s house prices drop, it was still 1.6% higher than the same month the year before, a quicker annual growth compared to February’s 1.2%.
Nationwide’s chief economist, Robert Gardner, mentioned, “There has been some recovery from the low activity seen towards the end of 2023, but it is still quite subdued compared to usual levels.
“For instance, mortgage approvals in January were about 15% lower than they were before the pandemic, which is largely due to how higher interest rates have impacted affordability.”
There has been a significant drop in mortgage rates since mid-last year when rates for an average five-year plan had surpassed 5.5%. Current data from Nationwide shows that the average has now decreased to below 4.5%.
As the largest third mortgage lender in the country and currently in the process of acquiring Virgin Money for £2.9bn, Nationwide noted that with the cost of living pressures decreasing and inflation rates going down, consumer confidence was improving, and surveyors were seeing an increase in new buyer inquiries.
The report also indicated that wages were rising faster than house prices, which may make it more feasible for prospective buyers to purchase a home.
Gardner stated, “If these trends continue, we might see a surge in activity, although how fast the market recovers will likely depend on where interest rates go from here.”
The Bank of England’s base rate is currently at 5.25%. Last month, policymakers hinted at the possibility of three interest rate cuts for the year after observing “encouraging signs” of inflation decreasing.
There’s a noticeable split in annual house price growth across different regions of England. In northern parts of the country, including the north-east, north-west, Yorkshire and the Humber, east Midlands and West Midlands, prices have increased by 1.7% over the year.
The area that experienced the lowest performance was the south-west of England, where prices dropped by 1.7% over the year.
Guy Gittins, chief executive of Foxtons, reported that his firm has seen a surge in the number of viewing requests and offers in recent times.
He conveyed, “Though increased mortgage rates are a concern for many buyers, affecting the price they can pay to some extent, the expectation that interest rates might decrease this year is keeping market confidence strong. We are observing buyers continuing with their purchasing plans without being discouraged.”
