Fall in house prices as mortgage costs increase
Shifting expectations for UK interest rate cuts have contributed to a dip in house price growth, according to a closely watched measure.
Nationwide reported a 0.4% fall in average property costs last month compared with March, taking the annual rate of growth to 0.6% from 1.6%.
Economists polled by the Reuters news agency had expected month-on-month growth of 0.2%.
The lender’s report said the easing reflected “ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year”.
Money latest:
Why you should book a holiday abroad on a Thursday
The cost of fixed rate mortgage deals has risen due to market expectations that a Bank of England interest rate cut is looking further away than had been anticipated at the start of the year.
According to the latest data from the financial information service Moneyfacts, the average two-year fixed residential mortgage rate is still creeping back up towards the 6% mark last seen since December.
It charted a figure of 5.9% on Monday – up from 5.87% seen last Friday.
The average five-year rate is nearing 5.5%.
The increases reflect rising borrowing costs for lenders themselves.
It is all based on market expectations that a UK interest rate cut will now not take place until August.
Interest rate cut hopes pushed back
Earlier bets had been on May but the Bank has recently signalled no let up in its concerns about the outlook for inflation, with those including the pace of wage growth remaining too high.
Nationwide said wider cost of living pressures continued to weigh on buyers during April, despite the pace of wage growth standing at almost double that for price growth.
Keep up with all the latest news from the UK and around the world by following Sky News
Be the first to get Breaking News
Install the Sky News app for free
Robert Gardner, Nationwide’s chief economist, said: “Recent research carried out by Censuswide on behalf of Nationwide found that nearly half (49%) of prospective first-time buyers (those looking to buy in the next five years) have delayed their plans over the past year.
“Among this group, the most commonly cited reason for delaying their purchase is that house prices are too high (53%), but it is also notable that 41% said that higher mortgage costs were preventing them from buying.
“Coupled with this, 84% of prospective first-time buyers said that the cost of living has affected their plans to buy, for example through having less money each month to save for a deposit.”