House prices edged higher in the year to May, according to the latest Nationwide House Price Index, beating back previous figures that showed a slowdown.
The annual rate of house price growth increased marginally in May to 3.5%, compared to 3.4% in April. The April figures were a significant drop from the 3.9% growth seen in March.
House prices were up 0.5% month on month, the May data showed, versus a 0.6% fall in April.
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The average house price now stands at £273,427, according to Nationwide.
Robert Gardner, Nationwide's chief economist, said: “Official data confirmed that there was a significant jump in residential property transactions in March, with buyers bringing forward their purchases to avoid additional stamp duty costs.
“Owner occupier house purchase completions were around twice as high as usual and the highest since June 2021, which was also impacted by stamp duty changes.”
Stamp duty relief for first-time buyers dropped on 1 April from £425,000 to £300,000 and fell from £250,000 to £125,000 for home movers, pushing up the cost of buying a property.
The housing market received a boost at the start of the year due to a rush to complete deals before the stamp duty thresholds dropped.
The data indicates the market is holding up despite the subsequent increase in purchase costs for buyers from the start of April.
“Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive,” Gardner said.
“Unemployment remains low, earnings are rising at a healthy pace – even after accounting for inflation – household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect,” he added.
Is now a good time to buy a house?
Borrowers are borrowing on average just above 5.5x their earnings in order to buy a property with a mortgage, according to Nationwide and Office for National Statistics data – significantly higher than the long run average of 4.5x.
With buyers stretched on affordability, Alice Haine, personal finance analyst at online investment platform Bestinvest, said while some are clearly pushing ahead with their purchases, others may now be mulling their options more carefully as higher costs pose a fresh challenge.
“Lower stamp duty thresholds have the biggest impact on first-time buyers as they must now save enough to cover a potentially sizeable tax bill in addition to their deposit,” she said.
“This may prompt more lenders to offer 100% mortgages to help first-timers get a foot on the ladder, particularly as a number of providers have already relaxed their affordability rules in a bid to attract more clients.”
Is now a good time to remortgage?
Borrowing conditions have improved in recent months, something that may be helping to prop up the housing market.
Mortgage rates have eased on the back of four interest rate cuts from the Bank of England since last August.
But sticky inflation may slow the pace of rate cuts from here, said Haine, driven by a sharp rise in most household bills in ‘Awful April’ along with businesses passing the burden of higher employment costs onto consumers.
There has also been global uncertainty prompted by US president Donald Trump’s tariff policies.
Haine said: “For almost half a million homeowners set to remortgage this year when they roll off their cheap, five-year, fixed-rate deals secured when interest rates were at rock bottom, it will be time to adjust their household budget to make space for an almost inevitable jump in repayment costs.
“Uncertainty is becoming the new normal and for many first-time buyers or home movers looking to refinance their existing mortgage soon, it may be better to push ahead with a purchase rather than wait for the ideal borrowing conditions.
“Plus, the traditional surge in listings at this time of year is a positive buyers can take advantage of, as a wider stock of homes to choose from raises the potential for heavier negotiation on price.”
