House prices grow slowly in March

Nationwide has reported a mixed picture of the housing market. On average, property prices increased 1.6% from March 2023, marking the quickest pace of growth since December 2022.

However, a slight dip of 0.2% in house prices was reported in March compared to February, indicating the first monthly decline since December 2023. This fluctuation comes amid a backdrop of mortgage rates reducing from their summertime highs but remaining significantly above the low levels post-pandemic.

Despite these rates softening, the cost of buying a home continues to strain budgets. For an individual earning an average salary of around £35,000, mortgage repayments now consume nearly 40% of their take-home pay, underscoring the ongoing affordability challenges within the market.

House prices remain roughly 3% below the peak levels of summer 2022. Both buyers and sellers are becoming more active, with property website Zoopla predicting a 10% boost in home sales this year. 

January’s figures showed a 15% drop in mortgage approvals compared to the pre-pandemic era, reflecting the squeeze from elevated interest rates, which have reached a 16-year peak. In February though, UK house prices experienced their first annual increase in over a year, signalling a rejuvenation in the housing market spurred by reduced borrowing costs. 

The Bank of England (BoE) recently kept the key interest rate steady at 5.25% but hinted at potential cuts, with financial forecasts anticipating a decrease to around 4.5% by year end. The BoE also reported a spike in new mortgage approvals in January, marking the highest level seen since October 2022, although lending rates are still low by historical standards. 

Nationwide’s analysis, which excludes cash and buy-to-let transactions — accounting for a third of all sales — highlights the affordability pressures dampening market activity and price growth, despite a recent increase. 

Nationwide chief economist, Robert Gardner, has said: ‘The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market. While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile.’