House prices fall again as mortgage rates spike
THE recent spike in fixed mortgage rates is starting to hurt the property market with house prices falling for the second month running in April, new figures show today.
Leading high street lender Nationwide said the average cost of a home in the UK dipped 0.4% month on month to £261,962, following a 0.2% fall drop in March.
The annual rate of growth has come down from 1.6% in March to 0.6% in April.
Lenders, including in the past few days, NatWest, Santander and Nationwide, have been increasing their fixed rate offers as hopes of an early move from the Bank of England to cut the cost of borrowing have receded.
A slower than expected easing of the rate of inflation, continuing strong wages growth, and more “hawkish” comments from members of the Bank’s rate setting Monetary Policy Committee (MPC) have pushed out the expected date of the Bank’s first move.
Markets are now pricing in August as the most likely date for rates to start coming down from their current level of 5.25%.
As a result, average fixed mortgage rates have been steadily rising since they bottomed out early in the year when lenders briefly offered deals below 4% leading to a brisk start to 2024 in the property market. Today the average two year fixed rate deal stood at 5.91%, compared with a low of 5.55% on January 25, according to analysts Moneyfacts. Five-year deals today averaged 5.48%, up 30 basis points from the low point of 5,18% on 1 February.
Other factors weighing on the property market include stretched affordability and prolonged political uncertainty in the run-up to the general election.
Nationwide’s chief economist Robert Gardner 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 of prospective first-time buyers 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.”
Ranald Mitchell, director at financial advisers Charwin Private Clients, said: “Buyers are behaving cautiously at the moment so the fall in prices in April comes as no surprise. The ebullience at the start of the year has been slowly eroded as mortgage rates have edged up.
“Supply has improved but the dwindling confidence in the market will only be resolved by a base rate cut. With many prospective buyers and movers stalling, and house prices largely flatlining, those waiting for better times could be in for a very long wait.”
Iain McKenzie, CEO of The Guild of Property Professionals, said: “Elevated living costs are still putting pressure on households to control their spending, while also making it more difficult for first-time buyers to save for a deposit.”