Housing market activity has been “broadly flat” over the last year, with the total number of transactions down by around 15% compared with 2019 levels, according to Nationwide’s House Price Index.
Transactions involving a mortgage are down even more (nearly 25%), reflecting the impact of higher borrowing costs. By contrast, the volume of cash transactions is actually around 5% above pre-pandemic levels. Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates, which are still well above the record lows prevailing in 2021 in the wake of the pandemic. For example, the interest rate on a five-year fixed rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021, but in recent months this has been nearer to 4.7%.
As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay – well above the long run average of 30%.”
Nathan Emerson, CEO of Propertymark, said that it is “especially positive news” to see further progression within the housing market year on year. He continued:
“…with affordability and confidence returning, despite interest rates remaining high currently. Once the political climate fully settles down following the general election, the housing market will hopefully see yet more buoyancy. Propertymark remains keen to see plans from policymakers as to how any incoming government intends to kick start their proposed house building ambitions, as well as learn more regarding any programme of support for first time buyers.”
Michelle Stevens, mortgage expert at personal finance comparison site finder.com said:
“As expectations of an upcoming base rate cut continue to grow, the market seems to be stabilising in anticipation of lower rates on the horizon. Although prices only edged up very slightly last month, over the last couple of weeks we’ve seen a few of the major banks reduce their mortgage rates, and this will no doubt help provide a much needed boost to confidence in the housing market.
If more banks follow suit, I’m hopeful that this could trigger a price war amongst mortgage lenders, which would be great news for buyers and the millions of people who are due to renew their mortgage this year.”
