Property values declined by 0.2% between February and March, the Nationwide house price index showed, albeit they were up 1.6% compared to the same month last year
UK house prices dropped for the first time in three months as high mortgage rates continued to hit the market, according to Nationwide.
Property values declined by 0.2% between February and March, the Nationwide house price index showed, albeit they were up 1.6% compared to the same month last year.
The average home was worth £261,142 as buyers were hit with the impact of interest rates which have sat at 5.25% since August last year.
Robert Gardner, Nationwide’s chief economist, said: Activity has picked up from the weak levels prevailing towards the end of 2023 but remain relatively subdued by historic standards.
For example, the number of mortgages approved for house purchase in January was nearly 15% below pre-pandemic levels. This largely reflects the impact of higher interest rates on affordability.
Northern Ireland remained the best performing area of the UK in the first three months of the year, with prices up 4.6% compared with the first quarter of 2023.
England overall saw a modest year-on-year rise of 0.4%, while Wales reported a 1.2% rise. Scotland’s annual price growth accelerated to 3.7%.
London remained the most expensive city in the country, with an average house price of £519,505. This was an annual rise of 1.6%, but a monthly decline of 2.4%.
Kate Steere, housing expert at finder.com, commented: Today’s figures show that we are not out of the woods yet. Lenders have reduced mortgage rates and wage growth has outstripped inflation, but buyers are still concerned about affordability issues and demand has been dampened as a result.
The BoE’s decision to hold rates has tempered house price recovery. Meanwhile, half of experts believe that the Bank will wait until June 2024 before reducing rates, meaning we are likely to see only a subdued recovery in house prices in the next couple of months, Steere added.
Mortgage advisers have called for the BoE to trim interest rates after the drop in house prices.
Emma Jones, MD of Whenthebanksaysno.co.uk, commented: Yes, activity levels remain subdued by historic standards, but sentiment is starting to improve. A base rate cut by the Monetary Policy Committee (MPC) would be welcomed and could encourage many more buyers to make their move.