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House prices rise for first time in over a year says Nationwide

Nationwide is the UK’s biggest mutually owned mortgage provider (Mike Egerton/PA) (PA Wire)
Nationwide is the UK’s biggest mutually owned mortgage provider (Mike Egerton/PA) (PA Wire)

UK house prices are rising again for the first time in over a year according to an influential survey from the UK’s biggest mutually owned mortgage lender.

The Nationwide building society revealed a 1.2% year-on-year rise in house prices in February, the first increase since January 2023. The month-on-month rise was 0.7%

A slowdown in the housing market during 2023 has been one of the main talking points in the sector. It came as the Bank of England fought runaway inflation with 14 consecutive rate rises, which took interest rates to a 16-year peak of 5.25% by August.

The next move from monetary policymakers is expected to be a cut, later this year. But worries that wholesale financial markets have moved too far in factoring one in have pushed the interest rates offered on mortgages higher in the last two weeks.

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February’s rebound compares with a 0.2% drop year-on-year in the previous set of data. It takes the average UK house price to £260,420.

House prices remain around 3% under the record levels seen in the summer of 2022.

And even after the February uptick, Nationwide’s chief economist, Robert Gardner pointed out that “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.”

He also said: “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.”

Nonetheless, attention remains firmly on the latest trends in mortgage rates being offered to house hunters.

“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,” said Gardner.

Natonwide itself upped rates on its mortgages this week. The move followed similar action from rival lenders HSBC and Santander. The hikes, of about 0.15% on a typical fixed rate, five-year mortgages, took rates to over 5.2% for a five-year fixed rate deal.

They came amid concern in the City that expectations on the pace of BOE cuts have become overblown and they have reached the wholesale financial markets, turning the tide in the mortgage market.The change comes via so-called swap rates, which define the cost of mortgages when passed on to borrowers, have crept higher amid a feeling that the BOE’s pledge to keep its main rate higher for longer will constrain the outlook for action from monetary policymakers in Threadneedle Street.

And one of the UK’s biggest property websites – Rightmove – underlined the feeling that the market was at a crossroads. It said today that “customer numbers are expected to drop slightly” in 2024 “given the ongoing uncertainty in the macro environment”. Its traffic for 2023 fell, by almost a billion minutes spent on the site, which is often the first step taken by many buyers towards home ownership.

It will all resonate in Downing Street ahead of Chancellor Jeremy Hunt’s Budget next Wednesday. It is expected to be the last finance billl ahead of a general election excpected later this year.

The high cost of housing in the UK and the difficulty millions face in getting on the property ladder are expected to be key themes in the battle for Downing Street.