UK house prices experienced a 0.4% increase in February, marking the sixth consecutive month of growth and bringing the average property value to £270,493, according to Nationwide’s latest House Price Index.

This annual rise of 3.9% is slightly below January’s 4.1% figure.

Robert Gardner, Nationwide’s chief economist, attributes this sustained growth to buyers expediting purchases ahead of the impending stamp duty changes set for 1 April. These changes will lower the nil-rate threshold from £250,000 to £125,000, effectively increasing the tax burden on property acquisitions.

Gardner anticipates that this policy shift will introduce volatility in the housing market, with a surge in transactions expected in March, followed by a potential slowdown in subsequent months.

He added: “Housing market activity has also remained resilient in recent months, despite ongoing affordability challenges. Indeed, the second half of 2024 saw a noticeable pick up in total housing transactions, which were up 14% compared with the same period in 2023.

“However, taking 2024 as a whole, transactions were still modestly (6%) lower than the levels prevailing before the pandemic struck in 2019.

“In terms of the pattern of transactions, it is notable that first-time buyer activity continued to recover, with mortgage completions in 2024 just 5% below 2019 levels. This represents a solid performance, given the interest rate environment – for example, five-year fixed mortgage rates are currently around 4.4% (for borrowers with a 25% deposit) compared to c2% in 2019.

“Cash transactions remained particularly robust, with activity 2% above pre-pandemic levels.”

APPREHENSION

Industry figures echo these sentiments. Tomer Aboody, director of specialist lender MT Finance, notes that the favourable mortgage rate environment over the past year has maintained steady market activity among first-time buyers and buy-to-let investors.

He added: “With the looming changes to stamp duty upon us, some are more apprehensive about the upcoming months and how the market will react to the fallout from Reeve’s October Budget. Many are hoping for further rate cuts or increased flexibility from lenders.”

JITTERY MARKET

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “With some lenders pulling their cheapest fixed rates, at the same time as others are launching them, the market is very jittery which makes it difficult to plan ahead.

“The recent surprise increase in inflation has reduced the likelihood of another imminent reduction in interest rates. It wasn’t so long ago that there was talk of five potential interest rate cuts this year, but that is looking increasingly unlikely.

“Borrowers must plan ahead as much as possible and seek advice from a whole-of-market broker. Locking into a rate makes sense and gives peace of mind when there is so much uncertainty and if rates are cheaper by the time you come to take out your mortgage, it should be possible to switch to a cheaper deal at that time.”

PRICES SETTLING

Jeremy Leaf, north London estate agent and a former RICS residential chairman, stated: “We have noticed, in our offices, a rush of first-time buyers in particular, trying to take advantage of lower stamp duty rates, which has skewed some parts of the market.

“Now it is almost too late to benefit from the concession, we are seeing prices settle and more balance between supply and demand. However, a shortage of houses, not flats, in some price ranges remains, which is continuing to drive interest and helping to maintain activity.”

MANAGEABLE VALUES

Jason Tebb, President of OnTheMarket, added: “Affordability concerns have been an issue for a while with rates higher than many borrowers have grown used to, along with the higher high cost of living and other pressures.

“With the markets expecting more rate reductions this year, this should give those buyers who are reliant on a mortgage for their purchase increased confidence about doing so. As more stock comes to market in order to take advantage of the traditionally busy spring market, values not running away with themselves.

“Buyers remain sensitive on price and won’t pay over the odds, so sellers should seek advice and price accordingly.”