The UK housing market has demonstrated 'somewhat surprising' momentum, with annual house price growth accelerating to 3.0% in April, pushing the average property value to a fresh record high, according to Nationwide Building Society.
Record High Prices
Property values increased by 0.4% month-on-month in April, taking the typical UK house price to £278,880 – a new record in cash terms. This follows a 2.2% annual growth rate in March.
Robert Gardner, Nationwide's chief economist, stated: 'Despite the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices, the UK housing market has continued to regain momentum following the slowdown recorded around the turn of the year.' He added that this is 'somewhat surprising given that indicators of consumer confidence have weakened noticeably.'
Household Finances Support Market
Gardner attributed the resilience to strong household finances: 'In aggregate, household debt is at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up in recent years, although these have not been evenly distributed across households.'
He noted that housing affordability had been improving due to income growth outpacing house price rises and a modest decline in mortgage rates. While market interest rates have risen recently, the impact on affordability has been limited, with swap rates remaining well below 2023 highs.
Economic Outlook
Looking ahead, Gardner warned that UK economic growth may be 'somewhat weaker and inflation higher than previously expected' due to Middle East developments, but the ultimate impact depends on the duration of the shock and policy response. He expressed confidence that if the shock passes quickly, any near-term softening in the housing market would be short-lived.
On Thursday, the Bank of England held its base rate at 3.75%, with the Monetary Policy Committee alert to the evolving situation in the Middle East. A worst-case scenario could lead to multiple rate rises and an increased risk of recession.
Industry Reactions
Nathan Emerson, chief executive of Propertymark, said: 'Affordability remains a key constraint, with higher mortgage rates continuing to cap the pace of growth. The market appears to be stabilising in a low-growth environment, where structural supply issues are doing much of the heavy lifting on pricing.'
Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that lenders continue to trim mortgage rates, and the Bank's steady rate should lead to a period of calm. Borrowers are securing rates in advance for peace of mind.
Karen Noye, mortgage expert at Quilter, commented: 'Mortgage rates will remain the dominant force. Fixed rates are driven by swap markets reacting to global developments. Recent easing has helped, but it could reverse quickly if inflation risks re-emerge. Preparation matters more than timing.'
Tom Bill, head of UK residential research at Knight Frank, said the impact of rising mortgage rates on house prices will be gradual, leading to marginally downgraded price forecasts for this year.
Rob Wood, chief UK economist at Pantheon Macroeconomics, doubted prices can keep up their recent pace but noted that rising prices despite a sudden change in interest rate outlook suggests consumer confidence that could help the economy weather the storm.
