Keep knowledgeable with free updates
Merely signal as much as the UK home costs myFT Digest — delivered on to your inbox.
UK home costs rose greater than anticipated in January, in keeping with mortgage supplier Nationwide, as easing mortgage charges helped to stabilise the property market.
Home costs elevated 0.7 per cent between December and January, the quickest tempo since October, knowledge revealed on Wednesday confirmed.
The determine was a lot larger than the 0.1 per cent improve forecast by economists polled by Reuters and took the common house price to £257,656.
Jake Stott, founding father of Manchester-based dealer Mondo Mortgages, mentioned the rise within the Nationwide knowledge “highlights the optimism that’s rising after a turbulent 2023”.
“Since lenders determined to slash charges proper from the beginning of the month, we’ve seen first-time consumers popping up like daffodils in spring,” he added.
The information presents additional indicators that the UK property market is enhancing as mortgage charges ease on expectations that the Financial institution of England will reduce rates of interest this yr.
The housing market’s resilience signifies a extra optimistic outlook for the broader financial system and might be intently monitored by policymakers forward of the BoE assembly on Thursday, when the financial institution is extensively anticipated to carry the benchmark price at a 15-year excessive of 5.25 per cent.
On Tuesday the BoE confirmed that the common price for brand spanking new mortgages fell in December for the first time since November 2021 and that mortgage approvals rose to a six-month excessive.
Charges on in style offers, comparable to two-year mounted mortgage charges with 60 per cent mortgage to worth, have eased from the summer time, reflecting expectations of decrease borrowing prices.
Robert Gardner, Nationwide’s chief economist, mentioned: “There have been some encouraging indicators for potential consumers just lately with mortgage charges persevering with to development down.”
Specialists additionally famous that rising actual wages and easing inflation from the height in 2022 additionally helped to assist home costs.
In January the annual contraction in home costs eased to minus 0.2 per cent, from minus 1.8 per cent within the earlier month, Nationwide reported.
The typical home worth was nonetheless £16,000 under its peak of £273,750 reached in August 2022, when the property market was hit by rising rates of interest.
Nevertheless, costs had been nonetheless about £42,000 larger than in January 2020, reflecting the pandemic growth when record-low rates of interest boosted demand.
Nationwide warned that elevating a deposit remained a serious problem for homebuyers. It calculated {that a} 20 per cent deposit on a typical first-time purchaser’s house is now about 105 per cent of common annual gross revenue.
That is down from the all-time excessive of 116 per cent recorded in 2022, however nonetheless near the pre-financial disaster stage of 108 per cent.
Nevertheless, the outlook for the property market has brightened as mortgage charges proceed to ease and actual family incomes are anticipated to enhance as inflation eases additional.
The interval of nominal home worth falls “is now behind us”, in keeping with Andrew Goodwin, chief UK economist at Oxford Economics. With in style mortgage charges falling for the reason that center of final yr, “the prognosis for the housing market now appears markedly higher than it did in 2023”, he mentioned.
