UK house prices fell for the first time in three months as high mortgage rates continued to hit the market, according to Nationwide.
Property values fell by 0.2% between February and March, the Nationwide house price index showed, although they were up 1.6% compared to the same month last year.
The average home was worth £261,142 as buyers were hit with the impact of interest rates which have stood at 5.25% since August last year.
Robert Gardner, Nationwide’s chief economist, said: “Activity has picked up from the weak levels prevailing towards the end of 2023 but remain relatively subdued by historic standards.
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“For example, the number of mortgages approved for house purchase in January was around 15% below pre-pandemic levels. This largely reflects the impact of higher interest rates on affordability.”
Northern Ireland remained the best performing area of the UK in the first three months of the year, with prices up 4.6% compared with the first quarter of 2023.
England overall saw a modest year-on-year increase of 0.4%, while Wales reported a 1.2% increase. Scotland’s annual price growth accelerated to 3.7%.
London remained the most expensive city in the country, with an average house price of £519,505. This was an annual increase of 1.6%, but a monthly fall of 2.4%.
Kate Steere, housing expert at personal finance comparison site finder.com, said: “Today’s figures show that we’re not out of the woods yet. Lenders have cut mortgage rates and wage growth has outstripped inflation, but buyers are still concerned about affordability issues and demand has been dampened as a result.
“The Bank of England’s decision to hold rates has tempered house price recovery. Meanwhile, half of experts believe that the Bank will wait until June 2024 before cutting rates, meaning we’re likely to see only a subdued recovery in house prices in the next couple of months,” she added.
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Mortgage advisers have called for the Bank of England to cut interest rates after the dip in house prices.
Emma Jones, managing director of Whenthebanksaysno.co.uk, said: “Yes, activity levels remain subdued by historic standards, but sentiment is starting to improve. A base rate reduction by the Monetary Policy Committee would be welcomed and could encourage many more buyers to make their move.”
Hannah Bashford, director at Model Financial Solutions, said: “If the Bank of England cut rates in the next few months, this will definitely help to stimulate the market and we’ll see more people moving again, which will help to boost house prices.”
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