31 March 2022
If you are covering the Nationwide House Price Index, please see the following comment from Karen Noye, mortgage expert at Quilter:
“Once again any predictions that house prices will begin to slow have been proven wrong. This morning’s Nationwide house price index shows annual house price growth rose to 14.3%, up from 12.6% in February – the strongest pace of growth since 2004. Month on month, house prices rose by a further 1.1% in March, with the average UK house price now sitting at a £265,312, an increase of more than £33,000 over the last year.
“While house prices so far appear undeterred, the challenging circumstances we are currently facing may finally see the start of a slowdown. The war in Ukraine has now been raging for more than a month and given inflation and the cost-of-living had already been soaring before it began, the situation has only worsened since. As such, energy prices and other everyday living costs are reaching extreme levels and are putting a strain on people’s finances.
“In an attempt to combat rising inflation, the Bank of England had already hiked interest rates twice prior to the outbreak of the war. Given the continuing situation, inflation is showing no signs of slowing and further rate hikes are expected as a result.
“The squeeze on everyday finances is being felt by almost everyone and as many are likely to feel less financially stable than they might have done previously, we could see more people think twice before taking on the expensive process of moving home. What’s more, rising inflation and any subsequent BoE interest rate hikes will see mortgage rates rise further still and could price more people out of buying a new home.
“How the housing market truly reacts to the current circumstances will not be seen for a few more months. However, it is unlikely that house prices will be able to continue rising at the same rate we have seen over the past couple of years – particularly against the backdrop of an economy already trying to recover from the impact of the pandemic.
“If we do begin to see a slowdown, house prices would likely experience a gradual fall as opposed to a sudden drop. There is simply too much demand and too little stock at present, so house prices are likely to remain high for some time yet.”
