UK house prices fall unexpectedly for second month in a row | Housing market

Housing market

Nationwide blames April slowdown on ‘affordability pressures’ on back of high mortgage rates

UK house prices have fallen unexpectedly in April for a second consecutive month, according to the building society Nationwide, as interest rate uncertainty and more expensive mortgages put a dampener on the traditional spring homebuying season.

With some economists saying that two month-to-month falls in the closely watched index “start to look like a trend”, and new fixed mortgage rates continuing to creep up, the data will put further pressure on the Bank of England before next week’s interest rate announcement.

The average house price in April was £261,962 – down by 0.4% on March, when the lender’s monthly index recorded a 0.2% month-on-month drop.

A typical UK home is now worth £11,700 less than it was in August 2022, weeks before Liz Truss’s disastrous mini-budget prompted financial chaos.

Nationwide also said the rate of annual house price growth fell to 0.6% in April from 1.6% the previous month. Robert Gardner, the lender’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.”

He added: “House prices are now about 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.”

Last week, major lenders including Barclays, HSBC and NatWest increased the rates on their fixed mortgage deals in response to some economists pushing back their forecasts for when the Bank of England will start to cut interest rates.

More lenders put up the cost of their new deals this week: on Tuesday, Nationwide lifted some of its fixed rates by up to 0.25 percentage points. Meanwhile, Moneyfacts, the financial data provider, said the average new two-year fixed mortgage rate was continuing to creep up and now stood at 5.91%.

The Bank is expected to announce an interest rate cut later this year, and while some economists believe this could come as soon as June, many others believe August or September is more likely.

Commenting on Wednesday’s figures, Tom Bill, the head of UK residential research at the estate agent Knight Frank, said the house price growth seen in the first two months of this year “is going into reverse” as higher mortgage rates take their toll on demand.

However, he added: “We believe demand and house price growth will pick up later this year as a rate cut moves on to the horizon.”

The Nationwide analysis pointed to some moderation in the recent recovery in housing market activity, in which mortgage approvals rose in March to their highest level since September 2022.

In a survey of first-time buyers commissioned by the building society, 49% of those hoping to take their first step on the property ladder in the next five years said they had delayed plans over the past 12 months.

Of those holding back on buying their first home, 53% said it was because house prices were too high, while 41% said higher mortgage costs were preventing them from buying.

Of those surveyed, 55% said they would be willing to buy in a different part of the country where house prices were cheaper, or they could get a bigger home.

Tomer Aboody, a director of the property lender MT Finance, said: “With a drop in house prices said to be created by a lack of affordability among buyers and uncertainties around interest rates and inflation, some stability or help is needed.

“Whether this comes from reduced interested rates, more flexibility on mortgages or potentially some stamp duty reform, buyers need to feel confident that they can commit to a purchase and move.”