According to the Nationwide House Price Index, May saw a 0.1% fall in UK house prices giving a 3.4% fall over the last 12 months.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “Following tentative signs of improvement in April, annual house price growth softened again in May, falling back to -3.4% (from -2.7% in April). However, this largely reflects base effects with prices broadly flat over the month after taking account of seasonal effects. Average prices remain 4% below their August 2022 peak.”
He said that mortgage approvals had shown some signs of recovery, although they remain 20% below pre-pandemic levels. He expected bank base rates to peak at around 5.5%, putting upward pressure on mortgage rates which had recently been trending down.
“Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape.” He expected house affordability to improve over time.
Iain McKenzie, CEO of The Guild of Property Professionals, said the readjustment in the market was unsurprising given the economic challenges, however as prices are now levelling off this should bring reassurance to both sellers and buyers. “Property sales are struggling to live up to the frenzied scenes we were seeing this time last year but with mortgage offers picking back up again, the outlook for the rest of the year could be brighter.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, said that sellers are proving realistic about the current economic picture and are pricing their properties accordingly. “There are signs that lower prices and better negotiation prospects for buyers is leading to a resurgence in activity,” she said. “Potential buyers will be keeping a close eye on the mortgage market though, with the recent removal of some products signalling that there could be more turbulence ahead as lenders factor in the likelihood of more base rate rises.”