(Bloomberg) — The UK housing market extended its stagnation in May as buyers faced constraints on affordability from the highest interest rates in 16 years, one of the nation’s biggest mortgage lenders said.
Halifax said its measure of property values fell 0.1% after no change the month before and a drop of 0.9% in March. That was weaker than Nationwide Building Society’s figures, which showed growth for the first time in three months.
Britain’s property market is struggling to find direction, with a shortage of places available to buy supporting prices during a period when buyers are only gradually emerging from a cost-of-living crisis that has constrained their budgets.
“UK house prices were largely static,” Amanda Bryden, head of mortgages at Halifax, said in a report Friday. “A period of relative stability in both house prices and interest rates should give a degree of confidence to both buyers and sellers. Set against a backdrop of a limited supply of available properties, the market is unlikely to see huge fluctuations in the near term.”
Housing has become one of the flashpoints in the general election, with both Prime Minister Rishi Sunak’s Conservatives and the Labour opposition pledging measures to help buyers and boost the supply of new homes.
Labour last night promised mortgage guarantees to first-time buyers in a bid to help young Britons get onto the housing ladder if it wins on July 4.
The housing market had been showing signs of recovery after a slump last year triggered by a cost-of-living crisis and recession. But doubts are now emerging after lenders including Natwest, Santander and Nationwide increased mortgage rates in response to rising swap rates, which are used to set the bulk of mortgage products.
“Market activity remained resilient throughout the spring months, supported by strong nominal wage growth and some evidence of an improvement in confidence about the economic outlook,” Bryden said.
From a year ago, prices are now 1.5% higher at an average of £288,688 ($369,190). The North West and Northern Ireland showed the strongest gains, with more than 3% growth in each place. London prices rose 0.2% to an average £536,821, the most expensive in the country.
(Updates with details from the report and Labour pledge)
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