Average house prices stayed flat in February, with just a 0.1% month-on-month decline to £298,602, a lender’s data showed.
The Halifax House Price Index showed the annual rate of inflation was 2.9%, unchanged from the month before.
Slower yearly house price growth was recorded in more regions and nations, but Scotland bucked the trend with an annual increase of 3.8%, up from 2.5% in January – bringing the average house price to £213,014.
Although this was flat at 5.9%, Northern Ireland continued to have the strongest annual house price growth, with values averaging £205,784.
In Wales, house prices rose by 2.8% year-on-year to an average of £226,811.
House price growth in London fell from 2.6% in January to 1.6% in February. Average property prices in the English capital remained the highest across the UK, at £545,183.
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Activity is still strong
Amanda Bryden, head of mortgages at Halifax, said: “February’s figures highlight the delicate balance within the UK housing market. While there’s been talk of a last-minute rush on new mortgages ahead of the changes to stamp duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase.
“That may help to explain why growth in first-time buyer property prices eased in February, falling to +2.4%, in contrast to homemover price inflation, which accelerated, reaching +3.7%.”
She added: “While house price growth has slowed overall, market activity remains strong and comparable to pre-pandemic levels, demonstrating a resilience amongst buyers that’s been evident in the face of higher borrowing costs.
“While those affordability challenges persist, the ongoing shortage of housing supply coupled with sustained demand suggests property prices will continue to rise this year, albeit at a more measured pace compared to last year.”
Affordability subduing house prices
Jason Tebb, president of OnTheMarket, said the steadiness of house prices suggested “affordability is keeping a lid on values, with buyers unable and unwilling to pay inflated amounts”.
He added: “Higher interest rates have dampened activity, so last month’s rate cut from the Bank of England will be helpful in giving the market a boost. As we approach the end of the stamp duty concession this month, further cuts could give the market some much-needed impetus later in the year.”
Mark Eaton, chief operating officer at April Mortgages, said the small fall in house prices only “knocks just a couple of hundred pounds off the average cost of a home”.
He added: “Stagnant house price growth is not uncommon at this time of the year, but it could mean that the difficult economic challenges facing households are softening growth.
“The recent announcement that energy bills are due to increase yet again could push more potential buyers to sit on the fence rather than sign up for a chunky mortgage.
“When house prices fall, even if it’s just a modest nudge downwards, the industry must look beyond blaming short-term policy changes and instead look at longer-term challenges like affordability.
“Raising awareness of larger loans of six or seven times the income of a buyer, using 10-year fixed-rate periods, will help those that are looking to escape the costly rental market, but are earning enough to show they are capable of affording a bigger mortgage.”
Stamp duty rush fading away
Some industry commentators noted that the slowdown in house prices was due to fewer people trying to buy a home before the stamp duty change, as the likelihood of completing in time lessened.
Babek Ismayil, founder and CEO of OneDome, said: “Changes to the threshold on 1 April means that aspiring homeowners are doing their best to complete their transaction, but the system isn’t fit for purpose.
“Some of that rush is starting to pass now, and today’s data shows house prices holding steady in February. This is a pattern we’ve seen accompanying recent tax changes, and we’ll expect prices to soften again once the deadline has passed.”
Jonathan Handford, managing director at Fine and Country, said: “House prices stabilised in February, marking a shift as buyers weigh up impending tax changes set to take effect in April.”
He said: “This slight drop in house prices signals that demand may be easing. As the April deadline approaches and tax changes take effect, some buyers could hold off on purchases, potentially leading to further price adjustments.
“For those struggling with affordability, a stabilisation or decline in prices may be welcome news. While rising property values benefit existing homeowners and investors, they can also push homeownership further out of reach for first-time buyers.
“With further interest rate cuts anticipated later this year, affordability could improve for those who wait.”
