UK house prices increased for the fifth month in a row this January, though the pace of growth showed signs of easing, according to Nationwide’s latest report.
Prices crept up by 0.1% from December, bringing the average property value to £268,213. This follows stronger monthly gains of 0.7% in December and 1.2% in November. Over the past year, prices rose by 4.1%, down from the 4.7% annual growth recorded in December.
Despite the slowdown, the 4.7% figure from December was still the strongest annual increase seen since October 2022, shortly after Liz Truss’s mini-budget sent mortgage rates climbing.
Robert Gardner, Nationwide’s chief economist, said the market is holding up, but challenges remain. The housing market continues to show resilience despite ongoing affordability pressures. While there has been a modest improvement over the last year, affordability remains stretched by historic standards.
Meanwhile, estate agent Foxtons reported that home sales in London reached their highest level in nearly ten years, and the company expects this momentum to continue into the first quarter.
Nationwide has also predicted a surge in sales activity as buyers aim to complete purchases before changes to stamp duty take effect on March 31. These changes will bring an end to the temporary increase in the nil rate band – which has allowed first-time buyers to avoid stamp duty on homes worth up to £425,000, and others on purchases up to £250,000. The temporary measure, introduced in September 2022, is set to expire following the October announcement by Rachel Reeves.
Karen Noye, a mortgage expert with Quilter, noted that many first-time buyers have been trying to secure deals before the deadline, stating “Many first-time buyers have, in recent weeks, been scrambling to get their property sales motoring ahead of the stamp duty rules changing in April.
“This might bloat prices in weeks to come as people lock in deals in the hope they can avoid higher taxes.
“For most, though, it is now too late, and people will struggle to get a house purchase through before the rule change. Given how much affordability is stretched for first-time buyers, this is yet another blow to those looking to get on the housing ladder”.
Nationwide’s affordability analysis highlights how challenging conditions are for those trying to buy their first home. The report shows that a buyer on an average salary, with a 20% deposit, would face monthly mortgage payments taking up 36% of their take-home pay – noticeably higher than the long-term average of 30%. The ratio of house prices to earnings stands at five times income, significantly above the typical historical average of 3.9 times.
Jonathan Handford, managing director at Fine & Country, commented on the outlook for the year, saying that a key demographic that will determine the market’s sustainability this year is first-time buyers. Looking ahead, a ‘likely’ interest rate cut by the Bank of England in February could further boost the market by prompting lenders to lower mortgage rates.
Handford also pointed out that the modest growth seen in January suggests stability, but lingering concerns around inflation – which fell slightly to 2.5% in December but remains above the Bank’s 2% target – could impact progress.
He also added that the coming months will reveal whether these trends hold or if affordability concerns and inflation start to weigh on growth.
Reference: The Guardian
