The UK housing market has demonstrated "somewhat surprising" momentum, with annual house price growth accelerating in April and pushing the average property value to a fresh record high, according to Nationwide Building Society.
Record High Prices
The average house price increased by 3.0% annually in April, up from 2.2% in March. Month-on-month, prices rose by 0.4%, taking the typical UK house price to £278,880 – a new high in cash terms.
Economic Context
Robert Gardner, Nationwide's chief economist, noted: "Despite the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices, the UK housing market has continued to regain momentum following the slowdown recorded around the turn of the year." He described the trend as "somewhat surprising given that indicators of consumer confidence have weakened noticeably."
Gardner attributed the resilience to strong household finances, with debt at its lowest relative to income in two decades and substantial savings buffers built up in recent years. He added that housing affordability had improved due to income growth outpacing house price growth and a modest decline in mortgage rates.
Mortgage Rates and Market Outlook
While market interest rates have risen recently, swap rates underpinning fixed-rate mortgages remain well below 2023 highs and align with late-2024 levels. Gardner cautioned that UK economic growth may weaken and inflation rise due to Middle East developments, but expressed confidence that if the shock passes quickly, any housing market softening would be short-lived.
The Bank of England held its base rate at 3.75% on Thursday. The Monetary Policy Committee noted it was alert to the evolving situation in the Middle East, with a worst-case scenario potentially leading to multiple rate rises and increased recession risk.
Industry Reactions
Nathan Emerson, chief executive of Propertymark, said: "Affordability remains a key constraint, with higher mortgage rates continuing to cap the pace of growth. The market appears to be stabilising in a low-growth environment, where structural supply issues are doing much of the heavy lifting on pricing."
Mark Harris, chief executive of SPF Private Clients, noted that lenders continue to trim mortgage rates and the Bank's steadiness should lead to a period of calm. Borrowers are securing rates in advance for peace of mind.
Karen Noye, mortgage expert at Quilter, warned: "Fixed rates are driven by swap markets reacting to global developments. Recent easing has helped, but it could reverse quickly if inflation risks re-emerge. For buyers, conditions are improving at the margins but far from settled."
Tom Bill, head of UK residential research at Knight Frank, said the impact of rising mortgage rates on prices will be gradual, with offers pre-dating the conflict working through the system. Knight Frank has downgraded its price forecasts marginally.
Rob Wood, chief UK economist at Pantheon Macroeconomics, doubted prices could maintain their recent pace but noted that rising prices despite a sudden change in interest rate outlook suggests consumer confidence that could help the economy weather the storm.
Sarah Coles, head of personal finance at AJ Bell, advised buyers not under time pressure to take stock: "Consider using this year's Lifetime Isa allowance to boost your deposit with the Government bonus, or ensure you have a decent savings safety net to weather unexpected emergencies."
