Higher mortgage rates and cost-of-living pressures continue to weigh on the housing market, with property prices falling in April, according to the latest monthly data from Nationwide Building Society.
The slowdown in the property market has gathered pace over the spring. Prices fell 0.4% in April, a larger drop than the 0.2% monthly fall recorded in March.
This means that prices are just marginally higher than a year ago, at 0.6%. This compares to a 1.6% annual increase recorded in March.
Nationwide says that house prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.
Nationwide’s chief economist Robert Gardner says this slowdown likely reflects ongoing affordability pressures, with longer term fixed interest rates rising in recent months, reversing the steep fall seen around the turn of the year.
Nationwide highlighted the fact that many potential first-time buyers were delaying plans to get on the housing ladder.
Gardner says research indicates that a combination of high property prices, rising mortgage costs and the cost-of-living crisis was causing prospective buyers to put plans on hold. Research by Nationwide among would-be FTBs found 84% saying higher living costs was making it difficult to save for a deposit, 51% said high house prices remained a barrier, while 41% said higher mortgage costs were preventing them buying.
Former Rics residential chairman and north London estate agent Jeremy Leaf says: “We are not surprised by the small drop in property prices. The increase in listings is resulting in more choice for buyers and some heavy negotiations on the ground which means only realistic sellers are proving successful.
“However, underlying demand is much more resilient than it was a few months ago, coinciding with the stronger spring market. There is confidence that affordability will improve now that inflation seems to be more under control and despite recent relatively small increases in mortgage payments.”
SPF Private Clients chief executive Mark Harris says: “As mortgage rates edge upwards again on the back of higher swap rates, affordability continues to be an issue for those relying on a mortgage for their property purchase.
“There are likely to be ups and downs in mortgage pricing in the weeks and months ahead but ultimately borrowers will have to get used to paying more for their mortgages as the days of rock-bottom rates have long gone.” However he adds that a potential cut in interest rates this summer could give the market a boost.
Tomer Aboody, director of property lender MT Finance adds: “Although property prices are lower, when you put this in context they’re still only 4 per cent below their peak in 2022, which means they’re still high and unaffordable in many instances.
“More volume of stock coming to market is needed and would-be sellers need to be encouraged to move in order to help keep prices in check.”
Quilter mortgage expert Karen Noye adds: “The lack of momentum in the housing market appears to be having a knock-on effect on house prices.
“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 monthly uptick in transactions in March, this was still 6% lower than the level of transactions seen in the same period last year.”
Noye adds that though the housing market remains subdued this could turn around in the summer. “The Bank of England is expected to announce its first interest rate cut later this year. 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.”
