UK housing costs accelerated in May, despite a rise in lending costs slowing the recovery, statistics released on Friday showed.
House costs rose by 0.4% in both April and May, said lender Nationwide, after falling for two consecutive months. This brought the annual increase to 1.3%.
Yet, even with a recent rise in benchmarked mortgage rates, expectations of a forthcoming Bank of England interest rate cut have disappeared.
Robert Gardner, chief economist at Nationwide, said the market was ‘showing symptoms of resilience’ as stronger real wage growth boosted customer confidence.
Rising Interest Rates Slow UK Housing Recovery
Data published on Friday by the Bank of England indicates that customers have been cautious. Mortgage approvals fell slightly in April, employer credit fell precipitously and families deposited a record £11.7 billion into tax-based financial savings accounts (ISAs) ahead of the annual deadline.
However, the decline in employer credit, from £1.4 billion in March to £0.7 billion in April, according to analysts, was partly due to the inclement weather which discouraged buyers and, in all likelihood, prevented them from visiting properties.
According to Rob Wood, chief UK economist at consultancy Pantheon Macroeconomics, consumers have already set aside enough profits to replenish their savings, and they would soon be ‘inclined to spend more’.
The rise in borrowing rates, he continues, has ‘slowed the housing market, but not derailed it yet’. With inflation proving stronger than expected and falling to 2.3% last month, buyers are currently betting that the UK’s significant financial institution will at best cut borrowing costs from 2024.
The benchmark rate set by the BoE is currently 5.25%, a 16-year-high. However, the housing market may have much less room to bounce back, given that the rate on a standard two-year fixed-rate loan fell to 4.73% in January, but has risen to 5% in recent weeks.
According to BoE data published on Friday, the recovery in the housing market has been stifled by rising lending rates.
House Prices Remain Stable Despite Market Trends
The internet loan approvals for the acquisition of houses fell to 61,100 in April from 61,263 in March, as stated via way of means of the principal bank. This suggests that the restoration in pastime that began out withinside the fall of remaining yr has stopped.
Although analysts mentioned that this will be the end result of mortgages authorized in advance withinside the year, while prices have been lower, internet loan lending extended from £0.5 billion in March to £2.4 billion in April, in step with the BoE.
Looking again, it`s been 12 months and a 1/2 of on account that residence fees had been flat, and the small price in May introduced them again to their January 2023 level.
