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UK home value progress slowed greater than anticipated in January as mortgage charges ticked up and affordability remained stretched, mortgage lender Nationwide stated.
The common home value rose to £268,213, up 0.1 per cent from the earlier month and 4.1 per cent yr on yr — lower than the annual rise of 4.7 per cent recorded in December.
Economists polled by Reuters had anticipated a month-to-month rise of 0.3 per cent and an annual rise of 4.3 per cent.
The slower than anticipated home value progress was “not too stunning given the rise in quoted mortgage charges on the finish of final yr”, stated Alex Kerr, economist on the consultancy Capital Economics.
Separate information from the Financial institution of England on Thursday confirmed that mortgage rates of interest rose in December, with the common charge for a two-year fastened mortgage with a 60 per cent loan-to-value ratio rising to 4.47 per cent, up from 4.39 per cent in November and 4.21 per cent in October.
The common charge was properly under its 6.22 per cent peak in the summertime of 2023, however up from 1.1 per cent in mid-2021, which means mortgage affordability remained stretched.
The BoE is anticipated to announce 1 / 4 share level lower in rates of interest to 4.5 per cent on Thursday. Markets are pricing three charge cuts all through this yr.
Mark Harris, chief govt of mortgage dealer SPF Non-public Shoppers, stated: “With the Financial institution of England anticipated to cut back rates of interest subsequent week, the outlook for debtors is trying up.”
Consultants say home costs are additionally being supported by a possible improve in demand forward of the expiry of a latest stamp responsibility vacation. From April, first-time consumers, for instance, will begin paying the levy for properties value £300,000 or extra, as an alternative of £425,000 at current.
Nationwide reported bettering housing affordability final yr partly because of wage progress.
Nevertheless, a potential purchaser incomes the common UK earnings and shopping for a typical first-time purchaser property with a 20 per cent deposit would nonetheless have a month-to-month mortgage cost equal to 36 per cent of their take-home pay — properly above the long-run common of 30 per cent.
Moreover, home costs stay excessive relative to common earnings, with the first-time purchaser home price-to-earnings ratio standing at 5.0 on the finish of 2024, nonetheless properly above the long-run common of three.9.
Robert Gardner, chief economist at Nationwide, stated the market had proven resilience “regardless of ongoing affordability pressures”.
“Whereas there was a modest enchancment over the past yr, affordability stays stretched by historic requirements,” he stated.
