"Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery."
- Robert Gardner, Nationwide's chief economist
UK house prices rose by 0.7% in February, resulting in an improvement in the annual rate of house price growth to 1.2% in February from -0.2% the previous month, the latest Nationwide house price index shows.
House prices are now around 3% below the all-time highs recorded in the summer of 2022, with annual growth marking a return to positive territory for the first time since January 2023.
Robert Gardner, Nationwide's chief economist, said: “The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market. Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.
“Nevertheless, near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates. After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up.
“Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery.
“While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile.”
Jonathan Hopper, CEO of Garrington Property Finders, commented: “It’s a bounceback, not a blip. Nationwide’s data shows house prices have risen in four out of the past five months, and the upward momentum is now so strong that prices have climbed 1.2% compared to this time last year.
“Crucially the market has also become more free-flowing. For sale signs are starting to sprout from homes across the country, and estate agents report a steady uptick in interest from both buyers and sellers.
“Two things are driving this resurgence in activity – mortgages have become more affordable and there’s a widespread sense that house prices have definitively turned a corner.
“Increasing numbers of buyers who sat on their hands last year are deciding that now is the time to strike, before prices start to accelerate upwards.
“For many, the case for now is compelling. The Nationwide’s data shows that average prices are 3% lower than the highs recorded in the summer of 2022, and while interest rates are many times higher than their pre-Truss levels, mortgage borrowing is notably cheaper than it was last year.
“Many lenders have paused the flurry of interest rate cuts seen at the start of the year while they wait for the Bank of England’s next move, and a little bit of stability in borrowing costs may be no bad thing as further big cuts at this stage could prompt a resurgent market to get carried away."
Karen Noye, mortgage expert at Quilter, added: “The latest Nationwide house price index shows the housing market continued its positive start to the year in February, with annual house price growth up 1.2%, the first sign of positive annual growth since January 2023, while on a monthly basis prices rose 0.7%.
“Lower mortgage rates at the start of the year appear to have spurred some buyers back to the market which has buoyed prices, but more recently we have seen a further uptick in rates as swap rates have risen so this could be relatively short lived. Just last week, lenders including Nationwide, NatWest, Santander and HSBC all made the decision to increase their rates.
“Yesterday’s monthly property transactions data revealed the first monthly uptick in transactions, up 2% to 82,000 in January 2024 compared to 80,500 in December 2023. However, the figure still marked the lowest level of seasonally adjusted residential transactions in January since 2013. Nevertheless, there is some hope for the future as transaction levels and prices are gradually picking up, and should the Bank of England opt to cut interest rates later in the year as is expected then we could see things pick back up more rapidly."
