Nationwide: April washout, and new buyers face the worst of all worlds

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the Nationwide House Price Index, showing April washout, and new buyers face the worst of all worlds.

Key points from publication:

• • In April, house prices fell 0.4% in a month, and were up just 0.6% in a year.
  • House prices are now 4% below the all-time highs reached in summer 2022.
  • 49% of first-time buyers have delayed their plans to buy in the past 12 months.
  • 53% said it was because house prices were too high and 41% said higher mortgage costs put them off.
  • 67% have between £0 and £10,000 saved towards a deposit. A 10% deposit on a typical first-time property is £22,000.
  • 38% of FTBs who have bought in the past five years had to compromise. Among this group, 40% bought a property that needed work and 34% bought in a cheaper area.
  • The average house price is £261,962.

Sarah Coles comments:

“April was a bit of a washout for sellers, with rising mortgage rates pouring cold water on the fires of optimism that had been lit under the market early in the year.

“The fire is not yet out, though.

“We know from yesterday’s Bank of England figures that mortgage approvals have risen again, and we also know these figures have suffered from seasonal adjustment – which expects a bounce in April.

“However, it’s not going to be balm to the souls of sellers.

“Meanwhile, first-time buyers face the worst of all worlds, as rising house prices and more expensive mortgages price them out of the market.

“According to Moneyfacts, at the end of January, the average 2-year fixed rate mortgage cost 5.56%, and by the end of April it cost 5.83%.

“It takes us back to the levels we last saw in the first week of January this year.

“It means that those who were optimistic about an imminent cut in rates at the start of this year will be getting increasingly frustrated.

“And things aren’t set to get any easier in the immediate future either, because the market isn’t expecting rate cuts until August or September – although June can’t be ruled out entirely.

“It’s also expecting just two or three cuts this year, so we’re not going to see massive movements in mortgage rates.

“We can expect to see the market eke out some growth regardless, because buyers have been waiting so long for things to change that some will take the plunge anyway.

“It’s why we’re seeing mortgage approvals continue to rise.

“However, we might not get a significant pick up in prices until mortgage rates start to feel substantially different.”

First-time buyers:

“Life for first-time buyers continues to be incredibly tough, as they face a double whammy of high house prices and higher mortgage rates.

“It’s one reason why so many of them are being forced to take on longer mortgage terms – averaging 32 years.

“Building a deposit is the key to affordability, but it’s a Herculean task at a time when rents are rising through the roof.

“It’s no surprise that two thirds of prospective buyers have saved less than £10,000.

“In this market, first-time buyers need all the help they can get, and it’s definitely worth considering a Lifetime ISA.

“You can save up to £4,000 a year and the government will bump it up by 25% – or as much as £1,000.

“You need to wait a year between opening the account and buying a property, but you can put in as little as £1 in order to get the ball rolling.

“It means it’s worth anyone hitting the age of 18, and qualifying for LISA, opening one to start the clock ticking.

“With so much of the property market stacked against new buyers, it’s worth taking advantage of the one thing working in your favour.” 

Kindly shared by Hargreaves Lansdown