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Average London house prices down 4% annually in April — could cheaper mortgages be ahead?

Regent's Canal in Hackney, where property prices are up (Daniel Lynch)
Regent's Canal in Hackney, where property prices are up (Daniel Lynch)

London house prices dropped 3.9 per cent between April 2023 and 2024, with the average house price in the capital standing at £501,880.

Elsewhere, the average UK house price increased by 1.1 per cent in the year to April, according to the Office for National Statistics (ONS).

It was the second month in a row with an annual increase in UK house prices, following eight months of annual falls.

Rent continued to rise in May 2024, with London seeing a 10.1 per cent annual increase in private rents compared to a rise of 8.7 per cent across the UK

The figures were released as data from the ONS showed that Consumer Prices Index (CPI) inflation slowed to 2 per cent in May, down from 2.3 per cent in April.

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Hackney once again bucked the London trend with positive price growth of 3.5 per cent. The average house price in the east London borough is now £611,025, up £20,586 from April 2024.

Newham saw average house prices rise by 2.7 per cent, boosting property values by £10,500 to an average of £402,435. Harrow saw an uptick of 2.5 per cent, boosting property prices by £12,385 to an average of £513,235.Wandsworth (£620,731) and Greenwich (£442,117) also saw positive annual house price growth of 1.9 per cent and 1.2 per cent respectively, while Hounslow saw just an extra £102 added to house prices.

All other London boroughs recorded falling house prices, most notably in traditionally expensive boroughs such as Kensington and Chelsea (-17.6 per cent), Hammersmith and Fulham (-16.1 per cent) and Westminster (14.7 per cent). Projections for prime property prices in the capital have been revised down as overseas investors wait for the outcome of the general election to assess the tax landscape.

“Hopefully today’s inflation drop is the first step on the journey towards lower mortgage rates in the second half of the year.

Matt Smith, Rightmove

Barking and Dagenham is currently the least expensive borough to buy in, with house prices down 2.3 per cent to an average house price of £333,425 — still well above the current UK average of £281,000.

London’s stalling house prices are, in part, a reflection of interest rate rises and mortgage affordability issues.

Experts predict that, despite inflation returning to target, the Bank of England is still likely to hold fire on any interest rate cuts — which could help to ease mortgage rates — until after the General Election on July 4.

The Bank’s next interest rate decision is on Thursday.

“This moves a step closer to the point when the Bank of England could feel confident enough that inflation is coming under control, opening the door to a cut to base rate.”

David Hollingworth, L&C Mortgages

Consumer Prices Index (CPI) was last recorded at 2 per cent in July 2021, later hitting a 40-year high of 11.1 per cent in October 2022.

ONS figures released on Wednesday show house prices rose by 0.6 per cent in England, 0.4 per cent in Wales and by 4.5 per cent in Scotland in the 12 months to April.

In Northern Ireland, property values increased by 4.0 per cent annually in the first quarter of the year.

Average UK private rents increased by 8.7 per cent in the 12 months to May, the ONS said, slowing from an 8.9% annual increase in April and below a record high annual rise of 9.2 per cent in March.

Matt Smith, a mortgage expert at property website Rightmove said: “Hopefully today’s inflation drop is the first step on the journey towards lower mortgage rates in the second half of the year.

“Market expectations are still that the first Bank of England rate cut is more likely to be later in the summer rather than tomorrow, but at least today’s news will keep us on course rather than throwing a curveball.”

David Hollingworth, associate director at L&C Mortgages said: “The fall in the rate of inflation to the Bank of England target rate of 2 per cent is positive news.

“This moves a step closer to the point when the Bank of England could feel confident enough that inflation is coming under control, opening the door to a cut to base rate.

“Mortgage borrowers hoping for an early cut in interest rates may have to wait longer than had been expected earlier in the year.”

Andrew Montlake, managing director of Coreco mortgage brokers said: “After many long months there is finally something to cheer about as inflation has hit its long-term target of 2 per cent, which will be a shot in the arm for the economy.

“A cut in base rate had also been anticipated but now there is widespread acceptance that mortgage costs will stay higher for longer.”

Jeremy leaf, north London estate agent

“Whilst we should see a resulting fall in swap rates which should give lenders room to release some ‘summer sizzler’ products with lower rates, one swallow does not make a summer.”

Jonathan Hopper, chief executive of of Garrington Property Finders, said: “Today’s figures capture the afterglow of the surge in activity seen at the start of the year.

“Many of the sales completed in April stem from deals struck in January and February, when buyers were out in force and the market was on a roll.”

Matt Thompson, head of sales at Chestertons, says: “The majority of buyers in April would have secured a fixed mortgage ahead of rate hikes which means they would have been largely unaffected by rising mortgage rates.

“Other house hunters decided to rethink their budget or widen their search radius to accommodate rate increases rather than giving up on their search completely.”Nicky Stevenson, managing director at estate agent group Fine & Country said: “As we expect the economic landscape to continue improving, it’s likely that we will see a spike in activity as the year progresses, especially with an interest rate cut from the Bank of England on the horizon.”

Jeremy Leaf, a north London estate agent said: “Today’s announcement of a fall in inflation growth and previous drops appear to have already been factored into the expectations of many home buyers.

“A cut in base rate had also been anticipated but now there is widespread acceptance that mortgage costs will stay higher for longer.”

Jean Jameson, chief sales officer at estate agent Foxtons, said: “The mortgage market seems to have settled and along with inflation levels coming down, there seems to be a new confidence in the sales market.”

Nathan Emerson chief executive of of property professionals’ body Propertymark said: “The impact of what has been a challenging economic period continues to play chaos for many renters.

“Not only are personal finances stretched to the max for many people, but we have the added uncertainty of a General Election and what that might ultimately mean for renters and landlords…

“Currently, demand is continuing to seriously outstrip supply, and this remains a major contributory factor to elevated rental prices across the board.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “There is a sense that some buyers and sellers are waiting for the first rate reduction before taking action, so a cut this summer could really give the housing market a boost.”

He added: “Following a somewhat challenging first half of the year, there are hopes that a post-election bounce will lead to a more promising autumn for the housing market.”