Halifax’s latest House Price Index showed that monthly house prices dipped just slightly last month, while figures released at the end of May from Nationwide showed a small increase. Both lenders agree that the market is showing resilience.

House prices were stable in May, according to Halifax. The lender’s latest House Price Index issued on 7 June showed that prices dipped by just 0.1.% last month.

However, the lender said that annual house price growth increased by 1.5% in May, compared to 1.1% in April. The average UK home now costs £288,688.

Resilient market

Halifax has described the market as resilient during the spring months and said this was due to economic wage growth and greater confidence in the economic outlook.

‘UK house prices were largely static in May, edging down slightly by 0.1% or around £170 in cash terms,’ says Amanda Bryden, Head of Mortgages at Halifax. ‘On an annual basis, prices rose for a sixth consecutive month, up 1.5% versus 1.1% in April.’

‘A period of relative stability in both house prices and interest rates should give a degree of confidence to both buyers and sellers,’ adds Bryden. ‘While homebuyers and those remortgaging will continue to respond to changes in borrowing costs, set against a backdrop of a limited supply of available properties, the market is unlikely to see huge fluctuations in the near term.’

Strongest performing region

The North West of the UK is currently the strongest-performing region. In May, prices grew by 3.8% annually. The average price of a property in the North West is now £232,258.

House prices in Scotland grew by 1.9% annually, with the average home there now costing £204,952.

Figures released by Nationwide at the end of May (based on its own lending) showed that, after a 0.4% drop in April, the average house price in the UK rebounded in May, reaching £264,249 compared to £261,962 the previous month. 

Despite these encouraging signs, mortgage rates remain relatively high. The Bank of England’s reluctance to cut interest rates as quickly or as steeply as initially predicted at the start of the year has kept rates elevated. However, this hasn’t deterred buyers as much as expected.

A senior economist at Nationwide commented – much like Halifax – that consumer confidence had improved in the last few months due to wage growth and lower inflation.

When will interest rates drop?

At this point, you may be wondering when interest rates will start to come down, especially if you’re due to remortgage this year.

The Bank of England’s next base rate review is on 20 June. The base rate has been at 5.25% since last August.

The bank aims to bring inflation down to 2%. While headline inflation has been slowing – down to 2.3% in the year to April – the picture is more complicated as there are other measures of inflation.

Inflation explained

One critical measure the Bank of England considers when discussing rate cuts is inflation in the services sector, which includes areas such as education and hospitality.

Unfortunately, this measure of inflation has not slowed as much as the headline figure. In April, it dipped only marginally to 5.9%, indicating that some underlying pressures of price inflation remain stubbornly high.

While we can’t say for sure what will happen, it’s possible that the base rate may not be cut in June and may not come down until later in the year.

We will keep you posted on any interest rate changes.

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