(qlmbusinessnews.com Tues. 2nd July, 2024) London, UK —

“Nationwide Reports Stable House Prices Amidst High Mortgage Costs”

The housing market in the United Kingdom remains challenging for many prospective buyers, as high mortgage rates continue to stretch affordability, according to Nationwide. Despite wages rising faster than house prices in recent years, the increase in mortgage costs has offset these gains.

In June, Nationwide reported that house prices showed a slight growth of 0.2% from the previous month, bringing the average house price to £266,064. Annually, prices have risen by 1.5%. However, housing market activity has been relatively flat, with transactions down by approximately 15% compared to 2019.

The surge in mortgage rates began after the Bank of England started raising its key interest rate in late 2021. Robert Gardner, Nationwide's chief economist, highlighted that current mortgage rates remain significantly higher than the record lows seen in 2021, following the pandemic. For instance, a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021 but has recently been around 4.7%. This has led to a continued strain on housing affordability.

Mortgage Rates Remain High

Nationwide's data, derived from its own mortgage lending, excludes cash buyers and buy-to-let transactions. Cash buyers, who account for about a third of housing sales, have seen an increase in transactions by about 5% compared to pre-pandemic levels. In contrast, mortgage-financed transactions have dropped by nearly 25% over the past year.

Regionally, Northern Ireland experienced the largest price increases, with a 4.1% rise from the previous year. Wales and Scotland saw a 1.4% annual increase, while prices in England rose by 0.6%, with northern regions generally witnessing higher increases than the south.

Despite recent reductions in mortgage rates by some major lenders, home loan costs remain considerably higher than pre-pandemic levels. According to Moneyfacts, the average rate for a two-year fixed mortgage deal is 5.95%, while a five-year deal averages 5.53%.

Attention is now on the Bank of England's Monetary Policy Committee (MPC) and its next meeting on 1 August. There is speculation about a potential rate cut, which could rejuvenate buyer sentiment. Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that a rate cut could happen as early as August, although persistent inflation and rising wages might delay it until the autumn.

The Bank of England recently indicated that around three million households will face increased mortgage payments in the next two years as their current deals, set before the rate hikes, expire. For a typical household seeking a new deal, monthly mortgage repayments are expected to rise by about £180, or 28%, with some 400,000 households potentially seeing increases of 50% or more.

In May, Bank of England figures showed a slight decrease in the number of mortgages approved, falling to 60,000 from 60,800 in April. The amount borrowed through mortgages also dropped sharply to £1.2bn from £2.2bn the previous month, excluding those remortgaging with the same lender.

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