31 May 2024
If you are covering the latest Nationwide house price index, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The housing market continues to demonstrate its considerable resilience in the face of tough economic conditions, with Nationwide reporting a 0.4% rise in house prices for May, following a period of subdued growth. This is likely in part due to the annual spring bounce as more buyers come to market making it more competitive. However, on an annual basis, prices have increased by 1.3% .The slight uptick suggests some stability, albeit under challenging conditions.
"Nationwide's data reflects a modestly positive trend, but the housing market remains very unpredictable and the growth in house prices is modest. Monthly property transactions have been lower than expected, indicating a cautious market but this is no surprise given the stress the nation’s finances have been under.
"Affordability remains a significant challenge, particularly for first-time buyers who face rising mortgage rates and the ongoing pressures of living costs. The dearth of these buyers makes it tricky for the market to operate due to incomplete chains. The volatility of mortgage rates driven by expectations of a longer period before interest rate cuts by the Bank of England, continues to dampen market activity. This environment makes it harder for new buyers to save for deposits and secure affordable mortgage deals. Whether the election adds another layer of unpredictability for buyers is yet to be seen but it is unlikely that this will change too many homebuying plans. The broader economic factors such as interest and continued lower inflation are more likely to influence buying decisions in the short term. Current prime minister Rishi Sunak is setting himself up as the candidate to bring lower interest rates but the reality is we are already on that trajectory given the recent inflation print. However, it is one area where he can play to a younger voter base after courting the grey vote with the promise never to tax state pensions.
"Attention now turns to the Bank of England’s upcoming monetary policy decision and what it intonates as a plan for the rest of the year. While no immediate changes in interest rates are expected, a future cut could provide a much-needed boost to the housing market. Lower borrowing costs would likely stimulate demand, as many prospective buyers are currently waiting for more favourable conditions.”
