Interactive Investor

Stubbornly hot housing market showing signs of cooling

29th April 2022 07:38

Myron Jobson from interactive investor

interactive investor comments on the Nationwide House Price Index.

  • Annual UK house price growth slowed modestly to 12.1% in April, down from 14.3% in March, according to the latest Nationwide House Price Index.
  • Prices up 0.3% month-on-month after taking account of seasonal effects.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The stubbornly hot housing market is showing signs of cooling, with the average price tag of a home in the UK eking out its smallest monthly gain since September last year in April – but a gain, nonetheless.

“Homebuyers are being hit by a double whammy of surging house prices and rising mortgage rates, forcing many with aspirations of buying their first property to dream on. The combination of both piles pressure on budgets which are being squeeze by the escalating cost of living.

“Mortgage affordability is a growing concern. The window for cheap mortgages is closing rapidly and the spectre of higher interest rates means that mortgage rates are likely to return to levels we haven’t seen in a while. Higher mortgage rates also mean that fewer homeowners are in the position to refinance to save money by getting a lower interest rate. 

“The property market remains tough for homebuyers and is set to get tougher from an affordability perspective, while the ongoing mismatch between the supply and demand for housing continues to fuel property price growth.

“Younger generations face mounting barriers to home ownership as deposit requirements remain challenging. The housing market has become increasingly polarised between those who can rely on the Bank of Mum and Dad for funds to help them onto the housing ladder and those who can’t.

“However, rapidly climbing mortgage rates could be the undoing of the surge in property values, forcing home shoppers to back off a bit. The burning question is when will this manifest.

“If the housing market does slow, it could allow inventory levels to rise and, in turn, result in a transition to a market with lower levels of home price growth. The picture is still fuzzy as economic and geopolitical uncertainty stemming from Russia’s devastating invasion of Ukraine are difficult to predict.”

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