First-time Buyers

Are house prices actually rising again?

Are house prices actually rising again?
Christina Hoghton
Written By:
Christina Hoghton

UK property prices rose 0.7 per cent in January, according to Nationwide Building Society, to £257,656.

But, despite the rise, prices are still down over the last 12 months, albeit by only 0.2 per cent.

So what’s going on?

The ups and downs of house prices

House price indices are always tricky to interpret and hard to compare, because they each measure something different – from asking prices to the price paid.

Nationwide’s index reflects the agreed property price on mortgages it has approved, so the price of the homes that will hopefully be purchased by its mortgage borrowers in the next few months.

The price could potentially change between offer and completion, or the deal could fall through.

It says that prices have ticked up slightly in January. That’s not surprising, because mortgage rates fell at the perfect time for the seasonal bump in demand we always get after the festive season – from six per cent at the start of December to 5.5 per cent today (Moneyfacts).

This was down to a mix of economic factors alongside lenders wanting to encourage mortgage borrowers after a slow few months.

Sarah Coles, head of personal finance at Hargreaves Lansdown, explained: “After a flat December, falling mortgage rates brought a bit of sparkle back to the market, and breathed some life into property sales.”

But let’s not get too carried away.

Rate expectations

Wider economic indicators, including inflation, suggest that the trajectory of rates isn’t as clear cut as it was just weeks ago, when the headlines told of a mortgage rate war.

The pace of mortgage rate cuts has already slowed – in fact we’ve even seen some lenders increasing rates in the last week.

If borrowing becomes more expensive (or even if the rate cuts halt where they are now) affordability remains squeezed, which could negatively affect house prices.

Alice Haine, personal finance analyst at Bestinvest, said: “Cutting asking prices to secure buyer interest will remain a key trend in the first few months of 2024 making it imperative that buyers negotiate hard on price.

“Whether that will change as the year goes on will depend on how quickly the Bank of England cuts interest rates.”

The Bank’s next interest rate decision is tomorrow (1/2/24) and it is widely expected to hold its Bank Rate at 5.25 per cent.