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House prices rose in February on both a monthly and annual basis

House prices rose in February on both a monthly and annual basis
Christina Hoghton
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Christina Hoghton

Annual house price growth has turned positive for the first time in a year, according to Nationwide.

The building society said that prices were up 1.2% in the year to February.

They also rose on a monthly basis by 0.7%, taking the average property price to £260,420.

Despite the rise, house prices are still around 3% lower than the all-time highs in summer 2022.

Mortgage rate impact

Robert Gardner, Nationwide’s chief economist, said: “The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market. Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.”

Alice Haine, personal finance analyst at wealth manager Bestinvest, added: “Confidence tentatively returned to the market at the start of this year following a challenging 2023, with mortgage approvals jumping to 55,200 in January – a 7% increase on December’s 51,500.

“While buyer appetite is likely to have been boosted by easing mortgage rates in the first few weeks of the year, some lenders increased rates in February as uncertainty around Bank of England (BoE) interest rate cuts clouded the outlook.

“With the next BoE interest rate decision not happening until March 21, all eyes will be pinned on next week’s Spring Budget to see what property market incentives the Chancellor pulls out of the hat.”

Trouble ahead?

Sarah Coles, head of personal finance at Hargreaves Lansdown, said ‘there are flies in the soothing balm of a positive property market’.

She explained: “The momentum of lower mortgage rates in January can only carry us so far.

“Stubborn inflation in 2024 meant during February the mortgage market had a bit of a re-think. The banks realised that they were getting ahead of themselves expecting imminent rapid-fire cuts, so they scaled back their expectations.

“As a result, mortgage rates stopped dropping, and have been rising again. At the start of February, according to Moneyfacts, the average two-year rate was 5.56%, and by the end of the month it was 5.75%. This isn’t a dramatic movement, but the direction of travel is important. If rates keep drifting up, we could see buyers hit pause.”