House prices in the UK were £270,493 on average in February, representing a 3.9% growth in values since last year.
The Nationwide House Price Index showed the annual rate of growth was softer than the 4.1% yearly increase recorded in January.
Compared to the previous month, average house prices were 0.4% higher in February, a larger increase than the 0.1% month-on-month increase recorded from December to January.
Robert Gardner, chief economist at Nationwide, pointed out this was the sixth consecutive monthly gain, adding that activity in the housing market had been resilient despite affordability challenges.
He said housing transactions picked up in the second half of 2024, but the year as a whole had a lower number of completions than before the pandemic, with a 6% decline.
Gardner added: “In terms of the pattern of transactions, it is notable that first-time buyer activity continued to recover, with mortgage completions in 2024 just 5% below 2019 levels. This represents a solid performance, given the interest rate environment – for example, five-year fixed mortgage rates are currently around 4.4% (for borrowers with a 25% deposit) compared to c2% in 2019.
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“Cash transactions remained particularly robust, with activity 2% above pre-pandemic levels.”
Mark Eaton, chief operating officer at April Mortgages, said another month of higher prices might come as a shock, as this was usually the quiet period for the market, and said this put homeownership further out of reach for first-time buyers.
Eaton added: “Many parts of the country have been unaffordable to buy for years. Our own research shows that in some areas, buyers need deposits of more than £200,000 to afford an average-priced home, based on typical lending limits imposed by the major banks.
“Access to larger loans of six times the income of a buyer, using 10-year fixed rate periods, will help those that already pay high rent prices but have higher-than-average incomes, although it won’t fix the problem entirely.”
Matt Thompson, head of sales at Chestertons, said the firm saw a decline in first-time buyer enquiries in February, now that it was less likely for buyers to beat the stamp duty deadline.
He added: “We did, however, see continuous demand from other buyer demographics; especially after the Bank of England announced a rate cut to 4.5%. With the news of sub-4% mortgages returning to the market, we expect more house hunters to start their search over the coming weeks.”
Better BTL activity
Tomer Aboody, director of MT Finance, said: “The lower mortgage rate environment we have experienced over the past 12 months has helped maintain steady market activity both for first-time buyers and buy-to-let landlords, along with buyers looking to upsize and downsize.”
Gardner said there had been a “gradual increase” in buy-to-let (BTL) purchases involving a mortgage in the last 12 months, “with rental increases and an easing in buy-to-let mortgage rates improving the ability to raise finance”.
However, he said activity was still “subdued” compared to historical levels.
Gardner added: “It is important to note that some cash purchases are also undertaken by landlords and that activity in this space appears to have remained more buoyant. However, higher transaction costs, as a result of recent and upcoming stamp duty changes and uncertainty relating to the regulatory environment, also appear to be having a cooling effect on this segment of the market.
“Looking ahead, the changes to stamp duty at the start of April are likely to generate volatility in transactions in the near term, as buyers bring forward their purchases to avoid the additional tax. This will likely lead to a jump in transactions in March, and a corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes.”
