Annual house price growth reached 1.2% in February, returning to positive territory for the first time in over a year, Nationwide’s house price index has revealed.
- Average UK house price rose by 0.7% month-on-month in February
- Prices up 1.2% year-on-year but are still down 3% on August 2022 peak
- Yearly rate of change returned to positive territory for first time since Jan 2023
Yearly rise: Nationwide recorded a year-on-year house price rise for the first time in 13 months
Property prices rose in February due to lower mortgage rates, according to the latest Nationwide house price index. Britain's biggest building society recorded a 0.7% increase in the average house price after taking account of seasonal effects. It means house prices are up 1.2% since this time last year, the first time Nationwide has recorded a positive annual reading since January 2023.
But prices are still around 3% below the all-time highs recorded in the summer of 2022.
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.”
Despite this positivity, mortgage rates are still high, while swap rates – which feed into pricing – have increased in the past month.
Tom Bill, head of UK residential research at Knight Frank, said “buyers feel confident that the only way for the base rate is down, which has seen demand and house prices pick up in recent months. However, the upwards pressure on mortgage rates in recent weeks shows sellers the importance of getting the asking price right. Banks are keen to lend and should eventually lower rates this year as inflation comes under control, which we believe will sustain positive annual growth in 2024 and see UK house prices increase by 3%.”
UK house prices rise for fifth consecutive month
UK house prices have risen for the fifth consecutive month, rising by 0.4% in February, Halifax reveals.
The rise is equivalent to £1,091 in cash terms and the average house price is now £291,699. House prices are 1.7% higher than a year ago, although this growth has slowed from 2.3% in January.
However, the average price is now just £1,800 off June 2022’s peak.
A relatively stable start to 2024
The director of Halifax Mortgages, Kim Kinnaird, said “these figures continue to suggest a relatively stable start to 2024 and align with other promising signs of increased housing activity, such as mortgage approvals. While it is encouraging that we’ve seen growth in recent months, what happens next remains uncertain. Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading. Even with growing wages and inflation falling back, raising a deposit and affording a sizeable mortgage remains challenging, especially for those looking to join the property ladder, so it remains a possibility that there could be a slowdown in the housing market this year.”
Momentum has helped keep house prices rising
The head of personal finance at Hargreaves Lansdown, Sarah Coles, said “the power of momentum has helped keep house prices rising into February. It’s a slower rise than January, as mortgage rate cuts eased, and there’s every chance this could peter out in the face of higher rates. However, after five months of house price growth, optimism is building that this could be the new normal. February brought market concerns that the Bank of England wouldn’t cut rates as fast as it hoped, so banks factored in higher rates for longer, and by the end of the month, this meant the average two-year mortgage rate rose to 5.75% Mortgage changes have a lag effect on demand, because those approved in January will tend to fund the sales in February, and to a certain extent in March, but their impact will diminish over time. This may be what we’re seeing in the figures.”
Significant shortage of housing inventory
Tom Brown, the managing director of real estate at Ingenious, said “nationally, there remains a significant shortage of housing inventory across most locations and price points. Consequently, any slow-down in sales volumes from homeowners is likely to be offset by increased demand from renters and investors. However, it’s essential to note that the situation is not uniform throughout the country and across all price ranges. When analysing opportunities, it is key to understand the underlying subsectors and regional dynamics.”
Jeremy Leaf, a north London estate agent and former RICS residential chairman, says “while there is often an over-concentration on house prices, when it comes to the health of the housing market, prices impact buyer and seller confidence. Rising prices, while not good for those trying to get on the ladder, seem to suggest that the market is picking up, although transactions and affordability, which are most stretched in higher value areas such as London, are arguably more relevant.”
Mark Harris, the chief executive of mortgage broker SPF Private Clients, said “brokers are finding that activity levels continue to improve, as buyers and sellers expect the next move in interest rates to be downwards, which has made them more willing to get on with their moves. However, the flurry of mortgage rate reductions has slowed, with a number of lenders increasing their ‘best buy’ rates again.”
Down-valuations on the rise - warning
Down-valuations appear to be on the rise and it is shocking agents and mortgage brokers.
Property professionals have seen an uptick in valuations for banks coming in lower, often with little evidence.
Laura Bairstow, founder of The Mortgage Masters, told the Newspage agency “we have noticed a definite increase in down valuations, especially in instances where the borrower only has a 5% or 10% deposit. Interestingly, we had a case this week where both the borrower and the estate agent were shocked at the extent of the down valuation so the borrower opted to have an independent valuation of the property and it came in at the asking price, way above what the lender had valued it at.”
Gareth Davies, director of South Coast Mortgage Brokers, said “It's down valuation central right now. We're seeing a clear uptick in surveyors disagreeing on valuation figures. We've had three cases this week where a surveyor has stated a value less than what the property was bought for in 2022, despite no evidence to suggest that this is happening in the respective regions. One client was furious with the attitude of the surveyor that came out to his house, as he apparently seemed 'hell-bent' on disagreeing with the estimated value from the second he entered the door. He even said that the place was on the 'lower end of the scale', despite being a beautiful detached four-bed place.”
Steven Hargreaves, adviser at The Mortgage Co, suggested "the increase is due to the low number of properties for sale, an upturn in buyers returning to the market and valuers being very cautious based on the past 12-18 months. We have seen a number of properties recently with multiple offers and therefore agents inviting 'best and final offers' means that, to secure a property, people feel they have to increase their offer beyond the asking price. Interesting times and we expect more down valuations over the coming months unless we have a positive upturn in housing stock or valuers becoming more optimistic, which will not happen.”