UK house prices show positive annual growth after over a year

January mortgage approvals have reached a record high since October 2022.

According to an index, annual growth in house prices began to show signs of improvement in February, marking the first time in almost a year.

According to the Nationwide Building Society, property values in the UK rose 1.2% yearly in February after declining by 0.2% in January.

It was the first month Nationwide had positive annual growth in home prices since January 2023. There was a 1.1% year-over-year increase in that month.

In February, the average home price in the UK increased by 0.7% month over month to £260,420.

"House prices are currently around 3% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects," stated Robert Gardner, chief economist at Nationwide.

"An uptick in the housing market appears to have been prompted by the decline in borrowing costs around the turn of the year," he continued. Surveyors reported a rise in new buyer inquiries at the beginning of the year, and industry data sources indicate a noticeable increase in mortgage applications.

However, the near-term outlook is still very uncertain, partly because of the continuous uncertainty surrounding the future direction of interest rates. Swap rates, which support fixed-rate mortgage pricing, have gradually increased again after plunging precipitously in late December.

Although borrowing costs are still far lower than their peak from the previous summer, continuing the current upward trend could slow the rate of any recovery in the housing market.

"Wage growth is now outpacing inflation by a healthy margin, which eases some of the pressure on household budgets, but it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile."

The Bank of England reported earlier this week that in January of this year, the number of mortgage approvals granted to home buyers surged to the highest level since October 2022.

This week, data from HM Revenue and Customs (HMRC) revealed that 82,000 homes were sold in January, a 2% increase over December 2023 and a 12% decrease from January 2023.

Although it was the first month-over-month increase in home sales since August 2023, HMRC noted that January's sales volume was still the lowest since 2013.

"While buyer appetite is likely to have been boosted by easing mortgage rates in the first few weeks of the year, some lenders increased rates in February as uncertainty around Bank of England interest rate cuts clouded the outlook," stated Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager.

Knight Frank's head of UK residential research, Tom Bill, stated: "Demand and house prices have increased in recent months as buyers are confident that a lower base rate is the only option."

"Yet, the pressure to raise mortgage rates in recent weeks highlights the significance of setting a reasonable asking price for sellers."

Even though the 'best buy' deals have recently ended, mortgage rates are still more attractively priced than they were a few months ago, according to Mark Harris, CEO of mortgage broker SPF Private Clients.

Hard-pressed borrowers will welcome the growing sense of optimism that things are improving overall, even though mortgage pricing will be ups and downs in the coming weeks and months.

"We're heading into one of the prime seasons for home sales, and sellers should look at this as a great time to get their home on the market," stated Nicky Stevenson, managing director of the estate agent group Fine & Country.

"This time of year, properties tend to sell the quickest, but motivated buyers are still snatching homes in desirable areas."

"While these figures give a good overview of the current state of house prices, they don't show how wildly they can vary from place to place," stated Yasin Patel, co-founder of Autarky Sukuk, a real estate investment company.

"As average house prices rise back over £260,000, it raises another problem because higher house prices, coupled with rising mortgage rates, risk pushing property out of reach for buyers again," stated Sarah Coles, head of personal finance at Hargreaves Lansdown.

The Guild of Property Professionals' chief executive, Iain McKenzie, stated: "We anticipate that the housing market will rebound this year, and a return to positive annual price growth is another encouraging sign.

"Sellers who have hesitated to put up for sale' signs since prices started to ease will welcome growth."