UK Housing Market Sees a 0.7% Boost in January, Averaging £257,656 per Home

falling house prices

In a positive turn for the UK housing market, house prices experienced a welcome increase of 0.7% in January, marking a noteworthy recovery following a 0.2% dip over the past year. According to Nationwide’s latest house price index, this improvement indicates a significant rebound, with the average property price now standing at £257,656.

Robert Gardner, Chief Economist for Nationwide, attributed this upswing to the decline in mortgage rates. Gardner stated, “There have been some encouraging signs for potential buyers recently with mortgage rates continuing to trend down,” noting a shift in investor sentiment towards optimism about future Bank of England rate cuts.

While this shift has positively influenced longer-term interest rates that underpin mortgage pricing, Gardner cautioned that the interest rate outlook remains ‘highly uncertain.’ He emphasised that mortgage rates would need to decrease to around 3% to restore a reasonable level of affordability for buyers.

Despite this positive momentum, the Bank of England’s Monetary Policy Committee, responsible for determining interest rates, is expected to maintain the current rate at 5.25% in its upcoming meeting on February 1, 2024.

Karen Noye, a mortgage expert at Quilter, acknowledged the challenges faced by prospective buyers in light of the Bank’s ‘higher for longer’ stance on interest rates. Noye suggested that the uncertainty had left many potential buyers in a ‘wait and see’ mode, delaying home purchases in the hope of securing lower rates in the future.

However, Noye also observed tentative signs of a return to the market, indicating that falling mortgage rates could entice more buyers sooner than anticipated, further boosting property prices. She emphasised the importance of seeking professional mortgage advice in navigating the still relatively unpredictable market.

Looking ahead, the interest rate outlook remains a key factor influencing the housing market. Experts, including Noye, anticipate that the Bank of England may not lower rates until the second half of 2024 unless inflation experiences a rapid decline.

In conclusion, the 0.7% rise in UK house prices in January presents positive news for the market and potential sellers. The impact of falling mortgage rates is evident, though the housing sector remains sensitive to the uncertain interest rate outlook. Prospective buyers are advised to stay informed and seek professional advice as they navigate the evolving landscape of the property market in 2024.

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