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Understanding the Dip in UK House Prices: What’s Happening and Why?

UK house prices have fallen for the second month in a row, catching many by surprise. According to Nationwide, a building society, this unexpected dip is due to “affordability pressures” caused by high mortgage rates and uncertain interest rates.


The average house price in April was £261,962, which is down by 0.4% from March. This decline adds to a trend that started in March when there was a 0.2% drop.


Compared to August 2022, the average UK home is now worth £11,700 less. This decline began after Liz Truss’s mini-budget led to financial chaos.


Nationwide’s chief economist, Robert Gardner, attributes the slowdown to ongoing affordability issues. He mentions that longer-term interest rates have been rising, reversing the earlier decline seen around the start of the year.


Annual house price growth also slowed to 0.6% in April, down from 1.6% the previous month. This indicates a broader trend of cooling in the housing market.


Major lenders like Barclays and HSBC have raised rates on fixed mortgage deals, responding to forecasts that the Bank of England might delay cutting interest rates.


More lenders are following suit, with Nationwide increasing some fixed rates by up to 0.25 percentage points. The average new two-year fixed mortgage rate now stands at 5.91%, according to Moneyfacts.


Analysts expect the Bank of England to announce an interest rate cut later this year, possibly in June, August, or September. However, the timing remains uncertain.


Tom Bill from Knight Frank notes that higher mortgage rates are dampening demand and reversing earlier house price growth. However, he anticipates a rebound later in the year as a rate cut becomes more likely.


Nationwide’s survey of first-time buyers reveals that many have delayed purchasing due to high prices and mortgage costs. Some are considering buying in cheaper areas or opting for larger homes.


Tomer Aboody from MT Finance emphasizes the need for stability and support in the housing market. Whether through reduced interest rates, mortgage flexibility, or stamp duty reforms, buyers need confidence to make purchases.


Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom.  Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand.

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