The Nationwide house price index showed this was a positive change, compared to the 0.4% decline recorded in December.
On an annual basis, average house prices were up 1%, compared to a yearly increase of 0.6% in the year to December.
Robert Gardner, chief economist at Nationwide, said the start of the year brought a “slight pick-up” in annual house price growth, following a dip in activity at the end of last year, likely due to uncertainty around property tax changes before the Budget.
He added: “Nevertheless, the number of mortgages approved for house purchase remained close to the levels prevailing before the pandemic.
“Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained.”
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Improving affordability
Referring to Nationwide’s recent report on affordability, Gardner said this had eased over the past year because of earnings growth outpacing house price growth, along with a “steady decline in mortgage rates”.
He added: “This has helped underpin buyer demand, with first-time buyer activity over the last year continuing to edge higher as a share of house purchases.”
Gardner said aside from Northern Ireland, affordability improved across all regions in the UK.
A good start to the year?
Nicky Stevenson, managing director of Fine and Country, said the modest rise in house prices was a “reassuring start to the year” for buyers and sellers.
Stevenson added: “The winter months tend to be quieter, so this uptick suggests there’s still firm interest in property, with buyers active where value and presentation align. The early part of the year can often be a release of pent-up demand from the end of last year, and this result fits that pattern.
“As confidence in the market strengthens, we expect this momentum to carry through into spring. For sellers, now is a good time to ensure properties are presented and priced to reflect local market conditions, as we tend to see an influx in viewings as the weather improves and nights become lighter.”
Karen Noye, mortgage expert at Quilter, said it was “far from a roaring start to the year” and activity remained relatively subdued.
Noye added: “This caution is understandable. With two or three base rate cuts expected later this year, many buyers are only tentatively engaging, weighing up whether to move now or wait for slightly cheaper mortgage rates to feed through.”
Noye said because of this, demand was “delayed rather than cancelled”, particularly among first-time buyers, who were more sensitive to affordability pressures.
She added: “Realistically, this means we are unlikely to see a period of rapid house price growth in the near future. Affordability constraints remain a hard limit on how far prices can run ahead, even as borrowing costs begin to ease.
“That said, this looks less like a market losing momentum and more like one in a holding pattern. Mortgage pricing has already improved compared with this time last year, and further rate cuts should gradually ease monthly repayment pressures. As confidence builds, demand is more likely to strengthen steadily through the year rather than surge all at once.”
Tom Bill, head of UK residential research at Knight Frank, said the rise in house prices was down to a “flurry of deals” being triggered before Christmas as there was greater certainty after the Budget.
However, he noted that mortgage approvals in the same month were 9% below the five-year average, suggesting that “demand is still fragile”.
Bill added: “The chances of two rate cuts this year have faded in recent weeks for reasons that include stronger-than-expected UK economic data, which underlines how prices and transaction levels will remain under pressure. The absence of political drama over the next few months would help confidence grow, but that might be wishful thinking.”
