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UK house prices fall for first time in three months

UK house prices A row of houses in Elgin Crescent, in Notting Hill, London, where a terraced house is currently for sale for over �12 million. The borough of Kensington and Chelsea is one of the most polarised in Great Britain, with some of the most expensive real estate in the UK just a short walk from several of the most deprived wards in the country - including the area around the Grenfell Tower. Picture date: Wednesday July 12th, 2017. Photo credit should read: Matt Crossick/ EMPICS Entertainment.
Surprise house price fall suggests a pause in UK housing market recovery. (Empics Entertainment)

UK house prices fell for the first time in three months as high mortgage rates continued to hit the market, according to Nationwide.

Property values fell by 0.2% between February and March, the Nationwide house price index showed, although they were up 1.6% compared to the same month last year.

The average home was worth £261,142 as buyers were hit with the impact of interest rates which have stood at 5.25% since August last year.

Robert Gardner, Nationwide’s chief economist, said: “Activity has picked up from the weak levels prevailing towards the end of 2023 but remain relatively subdued by historic standards.

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“For example, the number of mortgages approved for house purchase in January was around 15% below pre-pandemic levels. This largely reflects the impact of higher interest rates on affordability.”

Northern Ireland remained the best performing area of the UK in the first three months of the year, with prices up 4.6% compared with the first quarter of 2023.

England overall saw a modest year-on-year increase of 0.4%, while Wales reported a 1.2% increase. Scotland’s annual price growth accelerated to 3.7%.

London remained the most expensive city in the country, with an average house price of £519,505. This was an annual increase of 1.6%, but a monthly fall of 2.4%.

Kate Steere, housing expert at personal finance comparison site finder.com, said: "Today’s figures show that we’re not out of the woods yet. Lenders have cut mortgage rates and wage growth has outstripped inflation, but buyers are still concerned about affordability issues and demand has been dampened as a result.

“The Bank of England’s decision to hold rates has tempered house price recovery. Meanwhile, half of experts believe that the Bank will wait until June 2024 before cutting rates, meaning we’re likely to see only a subdued recovery in house prices in the next couple of months,” she added.

Read more: UK house prices average discount drops to £10,000

Mortgage advisers have called for the Bank of England to cut interest rates after the dip in house prices.

Emma Jones, managing director of Whenthebanksaysno.co.uk, said: “Yes, activity levels remain subdued by historic standards, but sentiment is starting to improve. A base rate reduction by the Monetary Policy Committee would be welcomed and could encourage many more buyers to make their move.”

Hannah Bashford, director at Model Financial Solutions, said: “If the Bank of England cut rates in the next few months, this will definitely help to stimulate the market and we’ll see more people moving again, which will help to boost house prices.”

Watch: How much money do I need to buy a house?

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