House prices remain stubbornly resilient amid affordability squeeze

interactive investor's Myron Jobson comments on the latest Halifax House Price Index.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Halifax’s latest house price data suggests that the typically busy spring season for the housing market is off to a slow start as high mortgage rates and stubbornly high inflation keep buyers squeezed.

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“The average house price fell by 0.3% last month from March, ending a three-month trend of growth. However, this was still up year-on-year and quarter and quarter, underlining a stubborn resilience in the housing market, which has been greater than many predicted.

“Halifax’s data is at odds with Nationwide’s finding - as is often the case. The latter reported a 0.5% growth in the average house price in April from March after seven months of declines. The conflicting assessment is indicative of the collection of micro-markets at play. The reality is that homeowners and buyers view and participate in the housing market from different and often conflicting perspectives.

“This topsy-turvy housing market has made many would-be buyers feel nervous about their prospects.

“Inflation is still enough of a problem that the Bank of England has upped interest rates for 11 meetings in a row, and is expected to do so again on Thursday, which would elevate variable mortgage rates and could make fixed-rate home loans more expensive. The stark reality is homes will continue to remain financially out of reach for many purchasers this year, and today’s high prices might not plummet anytime soon. While any fall in prices is good news for house hunters, it might not be enough to meaningfully offset the rising interest rate and its contribution to monthly mortgage payments.

“If inflation eases and we see a significant pullback in mortgage rates and uptick in real income, this would help loosen the affordability squeeze – perhaps enough to encourage buyers patiently waiting to enter the market to resume their house hunt.

“If you can’t make the numbers work, rather than stretching too much now, it might be more financially prudent to wait until they are a bit more comfortable financially to buy. But there are no guarantees, the affordability squeeze could become more acute before easing, and personal circumstances might require you to buy a home.”