UK House Prices Take a Hit: A Warning Sign for the Market?
The UK housing market has experienced a significant decline in April, with prices dropping by 0.4% - the sharpest fall since last summer. According to Nationwide, the high street lender, this marks the second consecutive monthly fall, with prices now only 0.6% higher than last year’s levels.
UK house prices take a hit
The slowdown in the housing market is attributed to ongoing affordability pressures, driven by the recent increase in longer-term interest rates. Robert Gardner, Nationwide’s chief economist, notes that the rise in mortgage rates has reversed the significant fall witnessed around the turn of the year.
The April downturn surprised economists, who had anticipated a modest 0.2% price rise. Expectations for a slight decline in the annual inflation rate to 1.2% were also surpassed, with March’s rate standing at 1.6%.
Mortgage rates on the rise
The average UK house price now stands at £261,962, still approximately 4% below the peak observed in the summer of 2022. However, prospective buyers continue to grapple with affordability challenges, particularly as mortgage costs have surged compared to 18 months ago.
“Half of prospective first-time buyers who planned to move in the past year have postponed their plans.” - Research conducted by Censuswide on behalf of Nationwide
The impact of the rising cost of living further compounds the challenge, with many individuals unable to save as much as they had hoped towards a deposit. Most respondents have less than £10,000 saved, falling short of the £22,000 typically required for a 10% deposit on a first-time buyer home.
First-time buyers face significant hurdles
Imogen Pattison, assistant economist at Capital Economics, anticipates improved affordability in the coming months, potentially leading to a rebound in house prices. However, she notes that sustained mortgage rate stability will likely keep demand subdued in the near term. Pattison predicts a modest increase in house prices, should interest rates be cut further than anticipated, potentially reaching a 3% year-on-year growth by the end of 2024.
House prices may rebound in the coming months
As the UK housing market continues to navigate the challenges of rising mortgage rates and affordability pressures, one thing is clear: the road to recovery will be long and arduous. But with experts predicting a rebound in house prices, there may be a glimmer of hope on the horizon for prospective buyers.
