The UK housing market is showing “somewhat surprising” momentum, with annual house price growth accelerating in April, pushing the average property value to a fresh record high, according to Britain’s biggest building society.
The average house price increased by 3.0% annually in April, accelerating from 2.2% annual growth in March, Nationwide Building Society said.
Property values increased by 0.4% on average month-on-month in April, taking the typical UK house price to £278,880 – a new record high in cash terms.
Robert Gardner, Nationwide’s chief economist, said: “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.”
“This is somewhat surprising given that indicators of consumer confidence have weakened noticeably.”
Mr Gardner added: “The market is likely being supported by the relative strength of household finances.
“In aggregate, household debt is at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up in recent years, although these have not been evenly distributed across households.
“Moreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in mortgage rates.
“While market interest rates have risen in recent months, the impact on affordability has so far been limited.
“Indeed, swap rates, which underpin fixed‑rate mortgage pricing, remain well below the highs reached in 2023 and are broadly in line with levels prevailing in late‑2024, implying only a partial reversal of earlier gains.”
Looking ahead, Mr Gardner said that UK economic growth is likely to be “somewhat weaker and inflation higher than previously expected as a result of developments in the Middle East, although the ultimate impact will depend critically on the duration of the shock and the policy response”.
He added: “However, the UK economy and housing market have proved remarkably resilient in recent years.
“This provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short-lived.”
On Thursday, the Bank of England base rate was held at 3.75%.
The Bank’s Monetary Policy Committee (MPC) said it had decided to hold borrowing costs steady but that it was alert to the evolving situation in the Middle East.
The committee considered several ways that events could unfold but a worst-case scenario could lead to multiple rate rises and an increased risk of recession.
Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Affordability remains a key constraint, with higher mortgage rates continuing to cap the pace of growth.
“As a result, 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 mortgage broker SPF Private Clients, said: “Lenders continue to trim their mortgage rates, and the steadiness from the Bank of England in holding interest rates should lead to a period of calm after much volatility.
“Borrowers are taking nothing for granted, however, with many choosing to secure rates in advance of when needed for peace of mind. Others are keen to proceed with already-reserved rates while they have them.”
Karen Noye, a mortgage expert at wealth manager Quilter, said: “Looking ahead, mortgage rates will remain the dominant force.
“Fixed rates are driven by swap markets, which are reacting as much to global developments as domestic policy. Recent easing has helped, but it could reverse quickly if inflation risks re-emerge.
“For buyers and those approaching a remortgage, conditions are improving at the margins but far from settled.
“Rates are no longer rising sharply, but nor is there a clear path lower. In that environment, preparation matters more than timing, with borrowers best served by reviewing options early and keeping flexibility as the market continues to adjust.”
Tom Bill, head of UK residential research at Knight Frank said: “The impact of rising mortgage rates on house prices will be more gradual than sudden as offers that pre-date the conflict work their way through the system, which is why we have downgraded our price forecasts for this year marginally.”
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “We doubt prices can keep up their recent pace,” adding: “But house prices still rising despite the sudden change in interest rate outlook suggests a degree of confidence among consumers, which could help the economy weather this storm better than expected.”
Sarah Coles, head of personal finance at AJ Bell, said: “At a time when we’re expecting other everyday prices to start rising faster, more expensive mortgages could be the final straw for many property-buying dreams.”
She added: “If you’re not under huge time pressure to buy, you have the opportunity to take stock.
“Consider whether you can get yourself in a better financial position to buy when the time is right.
“This could mean using this year’s lifetime Isa allowance to beef up your deposit – with the help of the Government bonus.
“Or it could mean making sure you have a decent safety net of savings to fall back on, so you can get through the expenses of buying and selling, and still be in a position to weather any unexpected emergencies that crop up.
“Because while the coming months could see a trickier time for the property market, it doesn’t have to mean the same for you.”
