"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."
- Robert Gardner, Nationwide's chief economist
UK house prices fell by 0.4% in April, resulting in a slowing in the annual rate of house price growth to 0.6% in April, from 1.6% the previous month, figures from the latest Nationwide house price index show.
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. 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 carried out by Censuswide on behalf of Nationwide found that nearly half (49%) of prospective first-time buyers (those looking to buy in the next five years) have delayed their plans over the past year.
“Among this group, the most commonly cited reason for delaying their purchase is that house prices are too high (53%), but it is also notable that 41% said that higher mortgage costs were preventing them from buying."
Karen Noye, mortgage expert at Quilter, commented: “The lack of momentum in the housing market appears to be having a knock-on effect on house prices. Nationwide’s latest house price index reveals house prices fell 0.4% month on month in April, while the annual rate of change also slowed to 0.6% down from 1.6% in March.
“House sales typically pick up in the spring, but ongoing affordability pressures appear to be dampening this trend this year. Given many lenders have upped their mortgage rates in recent weeks, we can expect this to continue and could see it translate into a further dip in house prices in the shorter term. Yesterday’s UK monthly property transactions data evidenced a continued stall in sales, and though we saw a minor 1% uptick in seasonally adjusted residential property transactions in March compared to February, rising to 84,200, this was still 6% lower than the level of transactions seen in the same period last year.
“Though the housing market is suffering a relatively subdued period at the moment, it may not last for too much longer as we could see a turning point during the summer months which could buoy house prices. The Bank of England is expected to announce its first interest rate cut later this year given inflation has continued making progress back down towards the Bank’s 2% target, falling to 3.2% in March. The prospect of a cut could translate into lower mortgage rates which could make moving home or taking the first step onto the property ladder more affordable and thus more attractive to prospective buyers who have been stuck in ‘wait and see’ mode."
Jonathan Hopper, CEO of Garrington Property Finders, added: “In the space of barely a couple of months, house prices have moved from recovery to reverse.
“The New Year jump in prices now seems a very long time ago, after Nationwide's data showed average prices fell in both March and April.
“Two things lie behind the market’s about turn on prices. The first is mortgage interest rates are heading in the wrong direction. The average cost of borrowing is higher now than it was at the start of the year, and this is putting off many would-be buyers.
“The Nationwide’s research shows 41% of prospective first-time buyers have put their plans on hold because mortgage costs are too high, and this pattern is being repeated across the market.
“The second is the oversupply of homes for sale in many areas. The flurry of activity seen at the start of the year opened the floodgates for many would-be movers who had been holding off on putting their home on the market.
“The current surge in supply, coupled with wobbling demand from buyers whose affordability is being stretched to the limit by stubbornly high mortgage interest rates, is pushing prices down in many parts of the country.
“On the flipside, buyers who are less dependent on mortgage borrowing now find themselves in a great position. In many areas they are spoilt for choice and it’s a buyer’s market – meaning they could secure a significant discount on the home they want if they plan and negotiate carefully.
“With the Bank of England not expected to reduce the Base Rate until next month at the very earliest, mortgage interest rates are likely to stay high for some time yet.
“Spring is supposed to be the time when the property market is in full flight. But the combination of fragile demand and abundant supply is likely to hold prices down and favour buyers who can proceed.”
