(CTN News) – According to Nationwide, UK house prices increased by 0.4% in May due to low inflation and pay growth boosting buyer confidence.
According to the Building Society, the average house price rose to £264,249 last month from £261,962 in April.
Mortgage rates in the UK have remained relatively high since the Bank of England is not expected to lower interest rates as rapidly or sharply as forecasted at the start of the year.
May’s rise reverses a 0.4% decline from the previous month.
According to Andrew Harvey, senior economist at Nationwide, “I think we have been a little surprised, actually, by the resilience in the market because those affordability pressures have been quite significant.”
It was reported that housing prices grew 1.3% nationwide in the year to May, compared to 0.6% growth in the year to April.
According to the Building Society, consumer confidence has “improved noticeably over the last few months, supported by solid wage gains and lower inflation”.
Moneyfacts, a financial information organization, reports that the average two-year fixed-rate mortgage is currently 5.92%. This compares to 5.83% in April.
The average rate for a five-year fixed mortgage is 5.49%, up from 5.4% last month.
According to Sarah Coles, head of personal finance at Hargreaves Lansdown, rising house prices are a barrier for many purchasers because “when coupled with higher mortgage rates, the monthly payments are pushed out of reach.”.
However, she stated, “Buyers are pushing through, largely due to people’s trust in their financial situation.
“The easing of inflation, coupled with robust wage growth and relatively low levels of unemployment, means people are feeling more secure.”
The latest Office for National Statistics numbers show that average income, excluding incentives, increased by 6% between January and March.
Interest rates
The Bank of England will publish its next interest rate decision on June 20th. Since last year, borrowing charges have remained at 5.25%. The bank’s objective is to keep inflation at 2%.
Mr. Harvey stated that, while headline inflation has slowed, falling to 2.3% in the year to April, “it is a complicated picture.”.
When deciding whether to decrease interest rates, the Bank of England evaluates inflation in the services sector, which includes areas such as education and hospitality, and provides a snapshot of pay growth and unemployment rates.
That measure of inflation has not slowed as much as the headline figure, falling only a little to 5.9% in April.
Mr Harvey stated: “Some underlying pressures of price inflation, such as in the services sector, remain stubbornly high.
“That is one of the reasons that the Bank of England is perhaps not quite ready to cut interest rates just yet because those pressures are still there and they are still very aware of the impact they could have.”
Nationwide bases its numbers on its mortgage lending, excluding cash buyers and buy-to-let arrangements.
Cash purchasers account for around one-third of all housing sales.
The building society stated that, with the general election approaching on July 4, it had examined housing price changes surrounding prior general elections and decided that there was no major effect.
- Make overpayments. If you still have time on a low fixed-rate loan, you may be able to pay more now and save later.
- Switch to an interest-only mortgage. It can keep your monthly payments cheap, but you will not be paying off the debt incurred while acquiring your home.
- Extend the duration of your mortgage. The average mortgage length is 25 years, but 30 and 40-year durations are now available.