UK house prices inch up as high rates squeeze buyers

British house prices edged 0.1 per cent higher in April to stand 1.1 per cent up on a year earlier, figures from mortgage lender Halifax showed on Tuesday, a slight pick-up from March’s 0.4 per cent annual growth as interest rates remain high.

Tuesday’s data marks a return to monthly growth after prices fell 0.9 per cent in March – the first decline since September – and comes after rival mortgage lender Nationwide reported an unexpected 0.4 per cent April price drop last week.

“The reality is that average house prices have largely plateaued in the early part of 2024,” Halifax’s head of mortgages, Amanda Bryden, said.

Economists polled by Reuters expect the Bank of England to keep interest rates at a 16-year high of 5.25 per cent when it announces its May rate decision on Thursday, and financial markets think rates are unlikely to fall before August.

BoE mortgage approvals data – which sometimes acts as a leading indicator for prices – hit an 18-month high in March, up 20 per cent on the year, as activity recovered from the knock received after former Prime Minister Liz Truss’ budget plans shook lending markets in late 2022.

“First-time buyers in particular (are) compensating for higher borrowing costs by targeting smaller properties,” Bryden said. “Affordability constraints are still a significant challenge.”

British house prices rose by 25 per cent between February 2020 and September 2022 – similar to big prices rises seen in many other Western countries during the COVID-19 pandemic – and in February were 3 per cent below their peak, according to official data.

Halifax said the average UK house price in April was 288,949 pounds ($362,284), with prices rising fastest over the past 12 months in Northern Ireland and falling most in eastern England, while London prices were little changed.