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House prices rise for the first time in a year as interest rates fall

Woman looking at advertisements in an estate agents window
Woman looking at advertisements in an estate agents window

House prices rose for the first time in more than a year in February as mortgage rates eased, new figures show.

Nationwide’s monthly house price index found the value of the average home rose by 0.7pc to £260,420 from January to February – an average increase of £2,764.

In the year to February, property values rose by 1.2pc, the building society’s house price index showed.

This means house prices are now just 3pc lower than their peak in the summer of 2022.

Robert Gardner, Nationwide’s chief economist, said the decline in borrowing costs had encouraged buyers back to the market, amid a higher-than-expected rise in mortgage approvals in January.

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Yesterday figures published by the Bank of England showed more than 55,000 loans were approved for home purchase in January – the highest since October 2022 – just before the financial turmoil in the wake of Liz Truss’s mini-Budget.

Mr Gardner said: “While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up the ground lost over the past few years, especially given consumer confidence remains fragile.”

Nathan Emerson, of estate agent body Propertymark, said the rise in house prices would encourage previously reluctant homeowners to sell up.

He said: “The Government needs to build on this as a chance to prove the economy is heading in the right direction.”

Amy Reynolds, of Richmond estate agency Antony Roberts, said there has been an uptick in people seeking to “upsize to their forever homes”.

She said: “The sales market continues to pick up momentum after a relatively quiet 2023 with a surge of committed buyers and a strong pipeline of serious applicants boding well for a busier spring market.

“Notably, we’ve seen an uptick in applicants with sizeable budgets seeking to upsize to their forever homes, as well as first-time buyers and second steppers wanting flats with outside space.”

However, there are warnings that banks are pushing up mortgage costs amid warnings of economic uncertainty over future rate cuts.

Mortgage expert Karen Noye at wealth manager Quilter warned that rising swap rates – the main pricing mechanism for fixed rate mortgages and an indicator of where the market thinks interest rates will be at a future point – could stall growth.

Last month, several major lenders including NatWest, Santander and Nationwide increased the cost of deals and raised the rates for fixed-rate mortgages.

Halifax has today increased rates on a number of its mortgages, including first-time buyer and new-build properties. The lender’s fixed deals will rise by up to 0.29pc.

Ms Noye said: “Lower mortgage rates at the start of the year appear to have spurred some buyers back to the market which has buoyed prices, but more recently we have seen a further uptick in rates as swap rates have risen, so this could be relatively short-lived.”

Yesterday, figures published by online estate agency Zoopla suggested house prices were rising in the north, but falling in the south.

A report published by the website found property prices in Northern Ireland were up 4.3pc year-on-year, followed by Scotland (2.2pc) and the North West (0.7pc).

Prices also rose in the North East, West Midlands, Yorkshire and the Humber and Wales, Zoopla said.

However, Zoopla’s report found the value of the average home fell in the East of England (-2.1pc), South East (-1.9pc) and South West (-1.7pc).

Meanwhile, house prices in London were down 0.8pc between January 2023 and January 2024.

It comes as Jeremy Hunt scrapped plans for 99pc mortgages aimed at getting first-time buyers to get on the property ladder.

Treasury insiders said the Chancellor had abandoned the taxpayer-backed scheme ahead of the Budget next week following a backlash from lenders that warned that the plans risked a surge in defaults among borrowers.