According to Nationwide’s latest house price index, the average house price in February came to £258,297, down from £258,297 in January.
The company added that the monthly price fall was the sixth in a row, leaving prices 3.7 per cent below their August peak.
Robert Gardner, Nationwide’s chief economist, said that the “recent run of weak house price data” started from the financial market turbulence in response to the mini Budget.
He added that the financial market conditions have since stabilised but “housing market activity has remained subdued”.
Gardner said: “This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.”
He said that although consumer sentiment had improved in recent months, it was “still languishing at levels prevailing during the depths of the financial crisis”.
Mortgage rates will stay above lows of 2021
Gardner said that it would be “hard for the market to regain such momentum” in the near team as economic headwinds “look set to remain relatively strong”.
He pointed to the labour market weakening and that mortgage rates would “remain well above the lows of 2021”.
Gardner said that despite the modest fall in house prices, mortgage payments for prospective first-time buyers earning an average income are “well above the long run average of take-home pay”.
The deposit requirements are also “prohibitively high for many” and are a “struggle” due to the cost of living, especially for those in the private rented sector, he added.
Gardner continued that conditions would “gradually improve” if inflation moderated in the next few months as expected and ease pressure on household budgets.
“Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months,” he added.
Interest rates and inflation are “keeping prices in check”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that the figures “reiterate continuing worries about interest rates and inflation, which are keeping prices in check”.
He added: “However, the market is definitely not in freefall. On the ground, we are seeing more listings and protracted sales so buyers have more choice, are taking longer and negotiating harder when making offers.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that average property prices fell in February due to higher mortgage costs, and along with the rising cost of living, have an “inevitable impact on affordability”.
He said: “Swap rates, which underpin the pricing of fixed rate mortgages and have been falling since the turmoil created by the mini Budget in September, have taken a turn and moved the other way in the past couple of weeks on the back of expectations of further base rate rises.
“Subsequently, several lenders who launched sub-four per cent five-year fixed-rate mortgages have since increased these, with mortgage rates likely to be up and down in coming weeks.”
Harris urged borrowers to seek advice from a broker before “taking the plunge or holding off in the expectation that rates will come down further”.
Nicola Schutrups, managing director at Southampton-based mortgage broker at The Mortgage Hut, said that the team saw a bounce in enquiries from new and existing customers in February.
She noted that new purchases had increase, more than doubling on the last quarter of 2022.
Schutrups added: “Very much like during Covid-19 and Brexit, we’ve seen resilience in our clients and an adjustment in customers’ expectations towards rates and monthly payments.
“Our clients who are first-time buyers have seen their rents also increase and want to get on the property ladder for more certainty. Personally, I do not see the base rate coming down in 2023, however, with energy costs and other key inflationary pressures reducing, I do think the pressure is reducing on consumers.”
