Average prices now stand at £269,914 following an 11.2% increase in May which, although strong, is less than the 12.1% increase in April.
It comes just after the Bank of England revealed mortgage approvals had fallen in April to their lowest level since June 2020. Experts said this was a sign rising interest rates plus the cost-of-living crisis were starting to affect people’s appetite for moving.
Indeed, Nationwide said it also noticed an increase in homeowners making home improvements.
“As well as looking to move, “explained Robert Gardner, Nationwide’s chief economist, “over half of those surveyed (54%) are considering enhancing their home.
“The most popular option for those looking to make improvements was to add or maximise space, with more than a third (37%) citing this as a motivating factor.”
Nationwide found 29% were keen to improve energy efficiency or reduce the carbon footprint of their home.
This comes as energy prices are soaring and ahead of the government’s target to meet net zero emissions by 2050.
What’s next for the housing market?
Nationwide expects the housing market to continue to slow as the year progresses.
Robert Gardener said: “Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.
“Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England (BoE) is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”
Moneyfacts has reported lenders have been moving their mortgage rates upwards in line with the BoE. A two-year fixed rate is now coming in at an average of over 3% for the first time in seven years.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, thinks it will be the rising mortgage rates which will eventually dampen demand for property.
She added: “We also know that mortgage companies are factoring in higher costs to affordability calculations, which will make it harder to borrow, and that more of their valuers are down-valuing properties, because they don’t think they’re worth what buyers are prepared to pay.
“We’re not expecting a blight to strike the market, because right now, demand is still outstripping supply, which is likely to keep prices from falling. However, over the coming months, we’re likely to see buyers take their time, exercise a bit more caution, and house price rises to slow significantly.”
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