Cheaper mortgages have put an early spring in the step of the property market with prices rising a higher than expected 0.7% this month, according to latest figures from Nationwide.
Britain’s biggest building society said the average cost of a home in the UK rose to £257,656 during the month. That leaves it just 0.2% below the same month last year.
In December prices were falling at an annual rate of 1.8%. The first major house price index of the year confirms anecdotal evidence that a mortgage price war among leading lenders over recent weeks has re-energised the market.
Estate agents report big rises in the number of applicants and offers since Christmas after headline home loan rates dropped back below 4% for the first time since Kwasi Kwarteng’s mini-Budget of September 2022.
In a further boost to buyers yesterday the Bank of England said the average interest paid on newly-drawn mortgages fell 6 basis points to 5.28% in December — the first drop since November 2021.
Financial markets are increasingly confident that the Bank will start cutting its headline rate from the current level of 5.25% by the late spring or early summer although it is likely to be left on hold at tomorrow’s meeting of the Monetary Policy committee.
Nationwide’s chief economist Robert Gardner said: “There have been some encouraging signs for potential buyers recently with mortgage rates continuing to trend down. This follows a shift in view amongst investors around the future path of Bank Rate, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.
“These shifts are important as this led to a decline in the longer-term interest rates (swap rates) that underpin mortgage pricing around the turn of the year. However, the partial reversal in recent weeks in response to stronger than expected inflation and activity data cautions that the interest rate outlook remains highly uncertain.”
However, the Nationwide data also showed that elevated London prices mean that only higher earners — particularly those with backing from parents — are able to clamber onto the property ladder.
In the capital the average income of first-time buyers is around 55% higher than the average income of an adult full-time worker.
This gap falls to 25% in the south-east and east of England, while in the north the incomes of first-time buyers are broadly in line with average regional incomes.
London based agents said they have seen a flurry of activity since offices reopened after the Christmas break.
Matt Thompson, head of sales at Chestertons, said: “Sellers also feel more confident about attracting the right buyer for their home which led to a slight increase in the number of properties being put up for sale in January.”
