Nationwide Building Society has reported that UK house prices fell by 0.4% in April, after taking account of seasonal effects.
This resulted in a slowing in the annual rate of house price growth to 0.6% in April, from 1.6% the previous month.
Robert Gardner, Nationwide’s chief economist, said: “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. House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.
“Recent research carried out by Censuswide on behalf of Nationwide found that nearly half (49%) of prospective first-time buyers (those looking to buy in the next five years) have delayed their plans over the past year.
“Among this group, the most commonly cited reason for delaying their purchase is that house prices are too high (53%), but it is also notable that 41% said that higher mortgage costs were preventing them from buying (see chart below).
“Coupled with this, 84% of prospective first-time buyers said that the cost of living has affected their plans to buy, for example through having less money each month to save for a deposit. Around two thirds (67%) of respondents currently have between £0 and £10,000 saved towards a deposit. With a 10% deposit on a typical first-time buyer property currently around £22,000, it is not surprising to find that c.60% of prospective buyers have yet to save more than a quarter of their target deposit.
“Interestingly, 55% of respondents said they would be willing to buy in another part of the country where house prices are cheaper, or where they could buy a bigger property. Inevitably, there is a lot of variation in how far people would be willing to move, but half said they would move more than 30 miles from their current location.
“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.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “As mortgage rates edge upwards again on the back of higher Swap rates, affordability continues to be an issue for those relying on a mortgage for their property purchase.
“There are likely to be ups and downs in mortgage pricing in the weeks and months ahead but ultimately borrowers will have to get used to paying more for their mortgages as the days of rock-bottom rates have long gone.
“First-time buyers in particular are finding it difficult to raise deposits and are relying on the Bank of Mum and Dad more than ever to buy, particularly in London.
“With an interest rate reduction on the horizon, perhaps as early as the summer, this will give the market a welcome boost.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said: “Spring has finally sprung with clear evidence that the housing market has kicked into gear. Our offices are the busiest they have been all year, particularly with family homes coming to market, as they look better at this time of year, and a significant uplift in viewings.
“Well-finished properties are capturing buyers’ attention, due to the uncertain costs when it comes to refurbishment work and the challenges in finding the right builder.
“Creeping mortgage rates are not helping the market and are holding back the lower end. The Bank of Mum and Dad remains essential for the majority of first-time buyers in London and the southeast where property prices are higher.”
