House prices in April fell at the sharpest rate since last summer as a recent rebound in mortgage rates put a dampener on demand. Prices retreated by 0.4 per cent last month, according to Nationwide, the high street lender.
That was the second monthly fall in a row and the largest Nationwide has recorded since August 2023. Prices are now just 0.6 per cent higher than they were this time last year. Robert Gardner, Nationwide’s chief economist, said: “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.”
April’s drop came as a surprise to economists, who had forecast that prices would rise by 0.2 per cent. They had expected the annual rate of growth to slip to 1.2 per cent. Nationwide estimates that the average price of a house in the UK is £261,962, or about 4 per cent below the peak in the summer of 2022.
However, would-be buyers are still struggling to be able to afford to move, with mortgage costs much higher than they were 18 months ago. Mortgage rates fell sharply over the winter in anticipation that the Bank of England would soon start cutting interest rates, but the timing of those cuts has become more uncertain because of stubborn inflation.
As a result, lenders have started to put their prices back up, with first-time buyers hit particularly hard. The average rate for a two-year fixed, 95 per cent loan-to-value mortgage is now above 6 per cent for the first time since November, according to Rightmove.
Half of prospective first-time buyers who had hoped to move over the past year have delayed doing so, according to research carried out by Censuswide on behalf of Nationwide. The most commonly cited reason for delaying their purchase was house prices being too high.
Prospective buyers also complained of higher mortgage rates limiting their affordability and the extra costs involved in buying a home. Almost all of the respondents said the cost of living has affected their plans to buy because they have not been able to save as much as they would have wanted.
Two-thirds of those polled by Cen suswide have less than £10,000 saved towards a deposit. Nationwide estimates that a 10 per cent deposit on a typical first-time buyer home is about £22,000. About 60 per cent of prospective first-time buyers have yet to save even a quarter of that. Imogen Pattison, assistant economist at Capital Economics, expects affordability to improve as the year wears on, which will lead to house prices rising again.
“In the coming months, we suspect mortgage rates will hover around their April level, keeping demand subdued [and preventing] renewed gains in house prices in the near term,” she said. “However, if we are right to think that interest rates will be cut further than most expect this year, mortgage rates should fall to just over 4 per cent by end- 2024 [from 4.8 per cent at the moment], leaving house prices up 3 per cent yearon- year.”
Source: The Times