Nationwide reports January surge in UK house prices

UK house prices rose more than forecast in January as cheaper borrowing costs extended the property-market recovery into 2024, according to one of the country’s biggest mortgage lenders.

Nationwide Building Society said the average price of a home exceeded expectations, experiencing a 0.7% increase between December and January, marking the fastest growth since October. This surpassed economists' forecasts of a 0.1% increase and brought the average house price to £257,656.

According to the Financial Times, Jake Stott, founder of Mondo Mortgages, attributed this increase to the optimism emerging after a challenging 2023. He noted a surge in first-time buyers, especially since lenders decided to cut rates from the beginning of the month.

The data suggests signs of stabilisation in the property market as mortgage rates ease. The resilience of the housing market is viewed as a positive indicator for the broader economy, particularly with expectations of a Bank of England interest rate cut. The bank's upcoming meeting is closely watched, and recent data showed a decline in average mortgage rates in December.

The month-on-month surge of 0.7% is the most rapid pace since October, aided by a decrease in mortgage rates.

The annual contraction in house prices in January improved to minus 0.2%, indicating positive trends. Despite these positive developments, Nationwide highlighted an ongoing challenge in raising a deposit. A 20% deposit for a typical first-time buyer's home is now around 105% of average annual gross income.

Despite this challenge, the outlook for the property market has improved. Mortgage rates continue to ease, and real household incomes are expected to improve as inflation eases further. Housing pundits believe that the period of nominal house price falls is considered to be behind us. With mortgage rates becoming more favorable, the prognosis for the housing market appears significantly better than in 2023.

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