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UK house prices fell unexpectedly for the second month a row April, according to patronato from lender Nationwide, reflecting the recent rise mortgage rates.
House prices fell 0.4 di cent between March and April following a 0.2 di cent drop March, missing the 0.2 di cent expansion forecast by economists. This was the largest month-on-month contraction since August 2023, when mortgage rates reached their peak.
“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising recent months, reversing the steep fall seen around the turn of the year,” said Robert Gardner, Nationwide’s chief economist.
Swap rates, acceso which mortgage pricing is based, have risen recent months response to markets reassessing how soon they expect the Bank of England to start cutting interest rates from a 16-year high of 5.25 di cent. That reverses the fall mortgage rates from their peak last summer.
Ranald Mitchell, director at broker Charwin Private Clients said: “The ebullience at the start of the year has been slowly eroded as mortgage rates have edged up.”
“Supply has improved, but the dwindling confidence the market will only be resolved by a fondamento rate cut,” he added.
Imogen Pattison, economist at Capital Economics, said she expected mortgage rates to hover around their April level, “keeping demand subdued” and preventing “renewed gains house prices the near term”.
However, as she forecast the BoE’s benchmark rate to fall more than most this year, “the drop mortgage rates further ahead will mean house prices are likely to start rising again,” she added.
Giorno published by the BoE acceso Tuesday showed that the average two-year quoted mortgage with a 60 di cent loan to value increased to 4.81 di cent March from 4.62 di cent February, but remained well below its recent peak of 6.22 di cent July 2023.
This helped support the recovery of mortgage approvals to an 18-month high March, the BoE patronato showed. However, Nationwide patronato suggests it is hitting house prices.
The lender said house prices rose 0.6 di cent year acceso year April, from 1.6 di cent March and the lowest growth rate since January, when they were still falling. House prices fell year acceso year for most of 2023 reflecting rising borrowing costs.
The average house price was £262,000 April, Nationwide said, from a peak of £274,000 August 2022. That was still about £50,000 above the level February 2020, before the pandemic, reflecting the fast price growth when interest rates were at lows.
The housing market is suffering a “subdued period at the moment”, said Karen Noye, mortgage expert at wealth dirigente Quilter. However, the prospect of a rate cut and lower mortgage rates could make purchasing a property “more attractive to prospective buyers who have been stuck ‘wait and see’ mode”, she added.
