UK house prices dip in April as higher mortgage rates bite

UK house prices fell unexpectedly for the second month in a row in April, as prospective homeowners continue to be hit with higher mortgage rates.

Property prices dropped by 0.4% between March and April, according to the Nationwide house price index. Economists had expected a small monthly rise of 0.2%.

The average UK home was worth £261,962, which was 0.6% higher than the same month last year, a slowdown from the 1.6% annual increase recorded in March.

“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year,” said Robert Gardner, Nationwide’s chief economist.

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With just two Bank of England cuts now expected in 2024, several lenders have recently raised rates – adding to pressure on homebuyers and those looking to remortgage.

According to the latest data from the financial information service Moneyfacts, the average two-year fixed residential mortgage rate is still creeping back up towards the 6% mark last seen since December.

Halifax is the latest lender to announce higher rates, with a plan to put up the cost of much of its mortgage range by 0.2 percentage points on Thursday.

Michelle Lawson, director at mortgage broker Lawson Financial, warned the market would not recover until the Bank of England cuts its base rate.

She said: “Rising mortgage rates have injected uncertainty into the market over the past month or so. Though there is still demand, we need a base rate cut and a Stamp Duty incentive to kickstart the market and get things moving again. Also, a General Election needs to be called sooner rather than later. The absence of a date for the General Election is adding to the mood of caution.”

Buyers have become cautious amid rising mortgage rates, which has led to the slump in house prices.

Ranald Mitchell, director at Charwin Private Clients, said: “Buyers are behaving cautiously at the moment so the fall in prices in April comes as no surprise.

“The ebullience at the start of the year has been slowly eroded as mortgage rates have edged up.”

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Nationwide said that potential first-time buyers were being put off their plans to purchase a property owing to high house prices and the high cost of borrowing.

Its survey suggested that about half of those considering buying a first home in the five years, had delayed their plans over the last year.

Gardner said: “Buying a property in a less expensive area appears to be the most common compromise that prospective buyers will make.

“Around a third (32%) said they would consider a smaller property than they wanted, while 28% would go for a property that needed work doing.

“Amongst recent first-time buyers (those who have bought their first home in the past five years), 38% said they ended up compromising on the property they purchased.”

Stephen Perkins, managing director at Yellow Brick Mortgages, said: “If you wanted evidence of how mortgage rates can impact the property market, this is it.

“Enquiries from buyers were bouyant in April, but many are holding off pulling the trigger and offering on properties.”

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