House prices have increased on a monthly basis for the first time since February 2024 in a sign of renewed confidence among buyers and sellers, Nationwide claims.
The latest Nationwide House Price Index shows average house prices rose by 0.4% in May to £264,249.
It comes after two consecutive months of house price declines, with values down 0.4% on average in April.
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Annual growth also improved from 0.6% to 1.3% and prices are now at their highest since November 2022 – the aftermath of the mini-Budget.
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months,” says Robert Gardner, chief economist for Nationwide.
“Consumer confidence has improved noticeably over the past few months supported by solid wage gains and lower inflation.”
Gardner is also confident that the general election won’t have a major impact on the property market.
How the UK housing market performed in May
Average prices had started to drop in recent months as high mortgage rates deterred property buyers but lower inflation and renewed hopes of interest rate cuts appears to have given the housing market a spring boost.
Nationwide recorded the first average monthly price growth since February while prices were also up by 0.3% on a quarterly basis.
Average prices now appear to be recovering after they began falling in the aftermath of the 2022 mini-Budget.
The average property price of £264,249 is higher than the £263,788 recorded in November 2022 and around £4,000 higher than this time last year.
However, average prices are still down on May 2022 when they were at almost £270,000.
Analysts suggest buyers are benefiting from falling inflation which could help bring interest rates down and ultimately lower the cost of borrowing.
Lenders already appear to be lowering rates to price-in cuts over the summer.
“House prices had been yo-yoing from economic gales, but May's figures indicate calmer waters ahead for the housing market,” says Nicky Stevenson, managing director at estate agent group Fine & Country.
“Previously hesitant home buyers are feeling more confident to pull the trigger on moving plans as financial strains ease.
“With inflation moving closer to the government’s 2% target and potential interest rate cuts this summer, demand may surge further into 2024. This will help to stabilise or even nudge prices upwards amid buyer competition – a positive development for sellers.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, says buyers are pushing through, helped by easing inflation, robust wage growth and relatively low levels of unemployment.
Coles suggests that the recent National Insurance cuts at the start of the year will also have left middle-earners better off – “even after tax hikes from frozen income tax thresholds are factored in.”
Is now a good time to buy a property?
Spring is always a busy time for the property market and demand appears to be on the rise.
The figures quoted by Nationwide and other house price reports are just averages though and there are likely to be regional variations.
The latest Zoopla House Price Index this week showed property supply is rising and sales agreed are also running 13% higher than this time last year, suggesting that buyers are taking advantage of recent mortgage rate cuts.
But affordability remains an issue as mortgage rates remain higher than many borrowers are used to.
Bank of England data shows lenders approved 61,140 mortgages in April, down from 61,263 in March.
"Affordability remains a significant challenge, particularly for first-time buyers who face rising mortgage rates and the ongoing pressures of living costs,” says Karen Noye, mortgage expert at Quilter.
“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.”
Noye suggests that an interest rate cut would help boost buyer confidence and get the market moving.
Another challenge for the housing market though is the prospect of the general election. Buyers and sellers may be tempted to see what housing market incentives political parties offer in their manifestos.
However, research from Nationwide suggests past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.
“2019 is a notable exception, but this was due to the impact of the pandemic, with the initial lockdown in 2020 suppressing housing market activity,” says Gardner.
“Activity subsequently bounced back once restrictions began to be lifted.
“It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers, elections are not foremost in their minds while buying or selling property.”
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