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House prices show further growth after pause in interest rate hikes, Nationwide says

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House prices recorded a second month of growth in November, according to a closely-watched report.

The Nationwide House Price Index showed average values were 0.2% higher, building on the 0.9% increase it measured in October.

It meant, the mortgage lender said, that prices were 2% down on an annual basis – outperforming the expectations of economists in a poll for the Reuters news agency which had forecast a 2.5% decline.

The rolling 12 month measure stood at its strongest level since February.

Nationwide released its report just days after Bank of England data showed a leap in mortgage approvals in October.

Analysts said the rise, to 47,400 from an eight-month low the previous month, demonstrated a renewed sense of optimism among buyers that the Bank’s cycle of interest rate hikes to tackle stubborn inflation was at an end.

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Housing market activity picking up

The Nationwide report covering October had indicated a greater role from a shortage of properties on the market.

But its chief economist, Robert Gardner, said on Friday: “There has been a significant change in market expectations for the future path of Bank rate in recent months which, if sustained, could provide much-needed support for housing market activity.”

The cost of fixed-rate deals has been coming down since financial markets started to price in no further interest rate increases.

However, that drop in average mortgage rates has been limited.

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Housing crisis in Bristol

The Bank of England governor Andrew Bailey has made it clear he does not expect the Bank to announce interest rate cuts for the foreseeable future – denting some confidence in markets that the Bank rate could slip back to 5% in June.

It currently stands at 5.25%.

Housing market experts say the pause to rate hikes, which started in September, would continue to help support prices in the coming months, barring any shocks, amid the lack of any stimulus to support activity.

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Commenting on the state of the market, Sam Mitchell, CEO of Purplebricks, said: “Banks are competing more aggressively on the rates they’re offering to consumers following two consecutive interest rate holds, which is driving increased activity in the housing market during a time when we usually experience a seasonal slowdown.

“In November, Purplebricks has seen viewings and offers increase week on week, which is unheard of this time of year.

“It is our sense that buying and selling decisions that have been held off in the face of 14 interest rate rises in a row and through the cost of living crisis will be released to fuel accelerated activity in 2024.

“This will be aided by increased heat in the rental market that will continue to fuel first-time buyers’ appetite to get on the property ladder.”

Matt Thompson, head of sales at Chestertons, added: “Although the autumn statement did not include much for house hunters, first-time-buyers in particular welcomed the news of the Guaranteed Mortgage Scheme being extended until June 2025.

“This, in addition to the previous announcement that interest rates remain at 5.25% for the time being, has led to a boost in buyer confidence in November.

“Many house hunters also don’t expect property values to fall much further; particularly as prices haven’t decreased to the extent as initially predicted. As a result, buyers have been more motivated to continue their property search last month.”

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