Home prices fell for the second month in a row, according to Nationwide, and rising mortgage rates discouraged many would-be buyers.
The value of the average UK home fell 0.4 per cent in April, following a 0.2 per cent drop in March, according to Nationwide, taking into account seasonal effects.
The drop was due to a statistical quirk, the building society said, as the traditionally busiest month ended slower than usual.
From recovery to reversal? UK house prices fell 0.4% month-on-month in April, according to Nationwide, and are now 4% below their summer 2022 peak.
The monthly declines are due to seasonal adjustment, which aims to smooth out months that tend to be busier and less active.
In fact, the unadjusted median house price has increased slightly from £260,420 in February to £261.96 in April.
While house prices remain 0.6 percent higher than this time last year, they are 4 percent below the peak recorded in the summer of 2022, again taking into account seasonal effects.
Nationwide says the price drop is a result of continued affordability pressures, which have been exacerbated by rising interest rates in recent months.
Since February 1, the average five-year fixed mortgage rate has risen from 5.18 per cent to 5.48 per cent, according to Moneyfacts, while the average two-year fixed rate has risen from 5.56 per cent to 5.91 percent.
The lowest five-year fixes are now above 4.2 percent when they were below 4 percent, and the lowest two-year fixes are all above 4.6 percent, when they were almost at the 4 percent earlier this year.
This week, NatWest, Santander and Nationwide increased mortgage rates by up to 25 basis points.
We do not expect to see significant falls in house prices this year. Real estate transaction volume is likely to fall more than house prices
Anthony Codling, European head of housing and building materials at investment bank RBC Capital Markets, said: “House prices fell for the second consecutive month in April as higher mortgage rates began to take effect; increases in Mortgage rates are small, but enough to thwart the plans of the marginal home buyer.
‘However, we do not expect to see significant house price falls this year; The volume of housing transactions is likely to fall more than house prices.
“It’s those who can buy, not those who can’t, who decide home prices, and mortgage approvals and real estate transactions point up, not down.”
Nearly half of would-be first-time buyers have delayed their plans over the past year, according to a recent Nationwide study.
Among this group, 53 percent cited home prices as too high and 41 percent said higher mortgage costs were preventing them from buying.
In addition to this, 84 per cent of potential first-time buyers said the cost of living has affected their purchasing plans, for example by having less money each month to save for a deposit.
Nearly half of potential first-time buyers have delayed their plans over the past year, according to Nationwide.
Aside from higher mortgage rates, the downward pressure on house prices is also believed to be due to a glut of homes coming onto the market.
The number of homes for sale is at a five-year high, according to Zoopla, with the property portal revealing there are 20 per cent more homes on the market than a year ago at this time.
Zoopla said it marked a “huge increase” in supply and was double what was available at the same time in 2022.
Jonathan Hopper, chief executive of Garrington Property Finders, said: ‘Two things are behind the market’s tendency to move prices. The first is that mortgage interest rates are going in the wrong direction. The average cost of borrowing is higher now than at the beginning of the year, and this is putting off many potential buyers.
‘Nationwide research shows that many prospective first-time buyers have postponed their plans because mortgage costs are too high, and this pattern is repeated across the market.
‘The second is the excess supply of homes for sale in many areas. The flurry of activity seen at the beginning of the year opened the floodgates for many potential suitors who had been putting off putting their home up for sale.
‘The current surge in supply, coupled with faltering demand from buyers whose affordability is being pushed to the limit by stubbornly high mortgage interest rates, is driving down prices in many parts of the country.
Jeremy Leaf, a north London estate agent and former chairman of Rics residential, added: ‘We are not surprised by the small drop in house prices.
“Increased offers are resulting in more options for buyers and some intense negotiations on the ground, meaning only realistic sellers are succeeding.”
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