New data from Nationwide showed the pace of UK house price growth slowed in January as higher borrowing costs dampened demand.
Average house prices rose just 0.1% in January month-on-month, and the annual rate of house price growth fell to 4.1%.
The slowing in house price growth coincided with a tick higher in mortgage rates amid expectations of less interest rate cuts through the rest of the year. This ultimately weighed on affordability.
“The housing market continues to show resilience despite ongoing affordability pressures,” explained Robert Gardner, Nationwide’s Chief Economist.
“As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards. A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
Analysts highlighted that while house price growth had slowed, first-time buyers – the lifeblood of the property market – were still finding it difficult to get on the ladder.
“House prices crept up in January. It wasn’t exactly a stellar start to the year, especially compared to the powerful growth we saw in December. However, prices are still under pressure from buyers trying to clamber through the stamp duty holiday window, before it slams shut at the end of March. Another small bump for house prices is another knock for first time buyers,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
“The property market risks becoming a victim of its own success, with prices near a record high. Nationwide said the house price to earnings ratio hit 5.0 at the end of 2024, which is well above the long run average of 3.9. When you add in the fact that the average 2-year fixed rate mortgage stuck stubbornly around the 5.52% mark this week (Moneyfacts), potential buyers will be horribly stretched.”