In February, the United Kingdom witnessed a significant rise in house prices, marking the first instance of annual growth in over a year. This development was reported by Nationwide Building Society, a prominent mortgage lender. This upturn is indicative of a rebound in the housing market, which had been experiencing a downturn due to elevated mortgage costs.
Specifically, house prices in February were 1.2% higher compared to the same month in the previous year. This increase is particularly noteworthy as it represents the first annual rise since January of the preceding year, as per Nationwide's report. This shift indicates a potential turnaround in the housing market trends.
Moreover, there was a noticeable increase in house prices on a month-to-month basis, with a 0.7% rise from January to February. This growth is in line with expectations and reflects a positive trend in the housing market.
Economists surveyed by Reuters had predicted a 0.7% increase in house prices on an annual basis, and a smaller increase of 0.3% month-on-month. These predictions have proven to be quite accurate, aligning closely with the actual data released by Nationwide.
Robert Gardner, Nationwide's chief economist, attributed the recent surge in the housing market to the decline in borrowing costs that occurred around the start of the year. This reduction in borrowing costs seems to have played a significant role in revitalizing the housing market.
The Nationwide price index showed that the current house prices are only 3% below the record high that was achieved in the summer of 2022. This peak in house prices was observed just before the market faced challenges such as increases in interest rates by the Bank of England (BoE) and instability in the bond market during the tenure of former Prime Minister Liz Truss.
In the three-month period leading up to the end of February, house prices rose by 1.2%. This rate of increase is the most significant since July 2022 and indicates a strong recovery in the housing market as reported by Reuters.
The BoE maintained its key borrowing rate at 5.25% in the previous month, which is the highest rate since 2008. However, there is speculation that a rate cut might be on the horizon, especially as inflation is expected to approach the 2% target. This anticipation of a potential policy change by the BoE has led to a reduction in mortgage rates.
Lastly, the BoE reported a significant increase in mortgage approvals in January, reaching the highest level since October 2022. This uptick suggests that there is growing interest and confidence among consumers in the housing market.
01.03.2024
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