UK House Prices Show Signs of Recovery with First Year-On-Year Increase in 13 Months

In a promising development for the UK property market, house prices have seen a year-on-year increase for the first time in 13 months, indicating a recovery after last year's property slump. Nationwide, the UK's largest building society, reported on Friday that house prices were 1.2% higher in February than in 2023.

The monthly data reveals a 0.7% increase in costs, pushing the average house price to £260,420 from £257,656 in January. Surpassing analysts' expectations, this uptick suggests a positive trend in the UK housing market, which experienced limited demand in the previous year.

Mark Dyason, Founder of Edinburgh Mortgage Advice, commented, "The index shows the market casting off a lull from the winter and has the prospect of higher activity than previously expected. This bodes well for the housing market with the impact of lowering interest rates and returning consumer confidence, strengthening the market."

The resurgence in buyer demand is attributed to the decline in mortgage rates witnessed at the beginning of the year. Despite the Bank of England's base rate remaining at 5.25%, improved lender confidence in January and lower inflation in 2023 have raised expectations of a potential rate cut.
Reduced mortgage costs, real wage growth, low unemployment rates, and limited property supply have collectively contributed to renewed interest in the housing market.

However, some experts caution that challenges persist in the housing sector. Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, noted, "The momentum of lower mortgage rates in January can only carry us so far," highlighting that rising inflation in 2024 led to re-evaluating mortgage market expectations.

While the continued momentum in demand remains uncertain, there is optimism regarding yearly improvements. New mortgage approvals in January reached their highest level since October 2022, indicating increased affordability.

Amy Knight of NerdWallet UK expressed positivity about the 1.2% increase, emphasising that this news signals a potential turning point for the housing market after a year with no growth. She also highlighted the significance of the upcoming budget announcement, suggesting that a rumoured 99% mortgage scheme could play a pivotal role in assisting aspiring homeowners in getting on the housing ladder.

The potential policy, allowing individuals to put down a 1% deposit on their first home, has sparked discussions about its impact on demand and housing affordability. As stakeholders await next week's budget announcement, the housing market remains dynamic, influenced by a complex interplay of economic factors and government initiatives.