All eyes on Thursday as property prices decrease

Mortgages fall behind as stubbornly high interest rates hit household finances

The latest Nationwide House Price Index highlights a challenging yet evolving landscape for the UK property market, ahead of this week’s General Election.

With house prices continuing to decline and market activity subdued, the prospect of falling mortgage rates brings a ray of hope for homeowners and buyers alike.

The report showed that prices have decreased by 3.8% year-on-year, marking the weakest annual growth since July 2009, a further decline from the 3.5% annual drop recorded in June.

Overall housing market activity remains low, with completed housing transactions in June being 15% lower than the same period in the previous year and around 10% below pre-pandemic levels.

Mortgage approvals have also declined, indicating a reduced number of buyers entering the market. This is attributed to higher borrowing costs and affordability challenges.

Northern Ireland has experienced the strongest growth in house prices, with a 4.6% quarterly increase. In contrast, the South West of England saw an annual decrease of 1.7% in house prices for the first quarter of 2024.

London showed a slight recovery with a 1.6% rise in prices after a previous year-on-year decline, indicating some regional disparities in market performance.

There are, however, signs of easing cost-of-living pressures as inflation gradually moves back towards the Bank’s target, improving consumer sentiment.

Recent trends show that several banks are starting to cut interest rates in response to stabilising inflation rates and an effort to stimulate the housing market. Several high street banks including Barclays, NatWest, Halifax and HSBC have all cut rates in the last week.

This month’s index comes amid news that the cost of the average mortgage in the UK has doubled in the life of the current Conservative government. In 2010, when David Cameron became Prime Minister, the average mortgage repayment stood at £583. Now, under Rishi Sunak and following Liz Truss’ disastrous six-week premiership, the average mortgage instalment is a whopping £1,045.

A potential reduction in mortgage rates could also stabilise the housing market by increasing demand. More affordable borrowing costs should encourage buyers to re-enter the market, leading to increased transactions and possibly mitigating further declines in house prices.

As market activity picks up, we should see more balanced price trends, preventing sharp declines and fostering a healthier market environment.

Depending on the election outcome, there could be shifts in housing policies, taxation, and government support for homebuyers, all of which might impact house prices and market activity.

Homeowners, buyers, and investors will be closely monitoring political developments, as the new government's stance on housing and economic management will play a crucial role in shaping the future of the UK property market, putting more emphasis on Thursday than perhaps initially anticipated.

As the country heads to the polls, the question is clear; is it evolution or revolution? A continued Tory government will likely mean stability for financial markets, but homeowners and buyers could potentially, in the short term at least, be boosted by a change of government.

Long term prospects remain to be seen and all eyes will be on the new government’s proposition for the nation’s fiscal future, whoever goes on to reside in the most famous address in Britain.

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