UK house prices witnessed an unexpected rise at the beginning of the year, with signs of mortgage rates taking a downward turn, according to Nationwide Building Society's report released Wednesday. After a stagnant December, house prices saw a monthly increase of 0.7% in January, significantly higher than the predicted 0.1%.
Additionally, the decline in annual house prices slowed down considerably to 0.2% from the previous 1.8%. This is the best result since January 2023, contrasting with expectations for a 0.5% decrease.
Robert Gardner, Nationwide's Chief Economist, suggested that investors are displaying increased optimism about the Bank of England reducing interest rates in the forthcoming years.
Gardner predicted that this shift in investor sentiment would lead to a drop in longer-term interest rates, which are essential in determining mortgage pricing, around the year-end. However, he advised exercising caution as the interest rate scenario remains highly unpredictable.
Despite the fact that a quick rebound in activity or house prices during this year seems improbable, Gardner expressed a slightly positive outlook. He emphasized that the evolution of mortgage rates would play a crucial role considering affordability was a significant limiting factor in last year's housing market activity.
He further highlighted that collecting a deposit posed another significant challenge for potential property buyers. Statistics released on Tuesday also showed a positive trend in the housing market. The Bank of England reported that mortgage approvals reached a half-year high in December, with 50,500 approvals compared to November's 49,300. The BoE, after maintaining the interest rate at 5.25% for two consecutive times, ended a streak of 14 successive rate hikes in September. The bank is speculated to persist with the same benchmark rate on February 1.
