The latest house price index from the mortgage lender showed a 0.7% rise month-on-month in February meaning the average UK property is now £260,420.
House prices are now, revealed Nationwide, 3% below the all-time highs it recorded in the summer of 2022.
Robert Gardner, chief economist for Nationwide, said: “The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market.
“Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.
“Nevertheless, near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates.
“After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up.
“Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery.”
What will happen to the property market in the months ahead?
With fixed rate mortgage prices on the rise and predictions a Bank of England (BoE) interest rate cut is unlikely until the summer, homeowners may wonder if the property market recovery will last.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said factors such as the looming Spring Budget, which takes place on Wednesday 6 March, may offer some hope with speculation the Chancellor may put in place stamp duty cuts along with a 99% mortgage scheme.
“The good news is,” she said, “that inflation remained at 4% in the 12 months to January and is expected to ease further in the months ahead, albeit with a few bumps in the road along the way, improving the affordability crunch for some.
“As more buyers hunt for homes and the number of agreed sales rises, the hope is that market activity will pick up pace from here. However, some movers – first-time buyers and those looking to upsize or downsize – are sitting on the fence waiting to see when interest rate cuts happen and whether mortgage rates improve further before they plough into the market.
“With the next BoE interest rate decision not happening until March 21, all eyes will be pinned on next week’s Spring Budget to see what property market incentives the Chancellor pulls out of the hat.”
Estate agents view of the property market
Nicky Stevenson, managing director at national estate agent group Fine & Country, said demand was building thanks to lower mortgage rates encouraging buyers to start their property search.
“Plunging inflation suggests better news is to come,” she added.
“Some buyers, assuming that we are at the peak of the rate rise cycle, are still waiting in the wings for the first downward nudge in interest rates before they return to the market. But this means there is a lot of pent-up demand that could soon be unleashed.
“We’re heading into one of the prime seasons for home sales, and sellers should look at this as a great time to get their home on the market.
“Properties tend to sell fastest at this time of year, and motivated buyers are still snapping up homes in desirable areas.”
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