The Nationwide Building Society has reported that UK house prices saw an unexpected drop in March, due to continuingly high interest rates affecting affordability. In contrast to the 0.7% increase witnessed in February, the house price index fell 0.2% in March, contradicting the projected gain of 0.3%.
This marks the first decrease in house prices in a three-month span. However, there was a year-over-year advance in house price inflation, rising to 1.6% from 1.2% in the preceding month.
Nationwide's Chief Economist, Robert Gardner, noted that mortgage approvals stand at approximately 15% below levels seen before the pandemic. This largely reflects the influence of high interest rates on property affordability. Gardner also observed an improving consumer sentiment, which he attributed to lessening living costs. Additionally, recent months have seen reports of a surge in new buyer enquiries and instructions to sell.
Despite the slow and steady pace, housing affordability is improving as income growth consistently outpaces house price growth, according to Gardner. He added, "If these trends continue, we can expect to see increased momentum, although the speed of recovery will be heavily influenced by the direction of interest rates."
First quarter data revealed a 1.1% increase in house prices compared to the previous three months.
