UK house prices stabilize in April due to higher mortgage rates | house price

House prices in the UK held steady in April after falling in March as higher mortgage rates prompted first-time buyers to move towards smaller properties, according to mortgage lender Halifax.

General housing prices rose by around 200 degrees last month to 288,949 units, up 0.1% monthly, but fell 0.9% in March, marking the first downward trend in six months. On an annualized basis, prices rose 1.1% in April, up from 0.4% in March, which Halifax said was due to weaker price growth at this time last year.

The reality is that average house prices have largely stagnated in early 2024, Halifax mortgage director Amanda Bryden said. This reflects that the housing market is adapting to the era of high interest rates. Borrowing costs are still more expensive than a few years ago, but homebuyers are gaining confidence from a period of relative stability.

She said buyers were adjusting their expectations, especially first-time buyers, to compensate for higher borrowing costs by targeting smaller properties. This was reflected in property prices in the first few months of the year, with apartment prices rising the sharpest, closing the growth gap to larger properties that had existed over the past four years.

Bryden said activity and demand were improving and mortgage approvals had reached their highest point in 18 months. But affordability remains an issue for first-time buyers and those opting out of fixed-term mortgages.

Mortgage rates have risen slightly again in recent weeks as financial markets price the pace of interest rate cuts by the Bank of England (BoE) slowing. The first cut in August is currently reflected in prices, with another cut expected later this year.

According to financial data provider Moneyfacts, the average two-year fixed mortgage interest rate is 5.93% and the average five-year fixed mortgage interest rate is 5.5%. This compares to an average two-year fixed of 5.78% and five-year fixed of 5.34% two months ago.

Bryden said: If the downward move in bank rates begins later this year, as is still expected, fixed mortgage rates should fall. Combined with the resilience the housing market has shown in recent months, we now expect property prices to rise slightly over 2024.

Property company Savills has reversed its forecast in November this year that UK house prices would fall and said it expects average prices to rise by 2.5% in 2024.

“It’s not surprising to see house prices rising a bit and then falling a bit,” said Jeremy Leaf, a north London estate agent. The patterns we discovered are repeated in the field, reflecting that some sellers are more realistic than others.

The market has lost some momentum over the past month, consistent with recent small increases in mortgage rates and listings. But at least for now, the underlying trust is quite strong, giving buyers the opportunity to negotiate a little harder where possible.

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A separate survey on Tuesday showed UK construction output rose to its highest level in more than a year in April despite poor performance by housebuilders.

S&P Global's latest health check said weak demand and higher borrowing costs explained the decline in homebuilding last month, but the performance of two other segments of the construction sector – commercial and civil engineering – was stronger.

Overall, the construction industry Purchasing Managers' Index rose from 50.2 in March to 53.0 in April, showing an upward trend for five consecutive months and reaching its highest since February 2023. A number above 50 indicates that production is increasing.

Tim Moore, director of economics at S&P Global Market Intelligence, who authored the survey, said: “The construction sector recently returned to growth in April, with overall industrial activity growing at the fastest pace in 14 months as orders continued to recover. Demand was boosted by growing confidence in the UK's economic outlook.

In April, commercial construction was strong, and civil engineering also made a solid contribution to overall growth. Weak market conditions in the homebuilding sector continued to weigh on activity.

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