May has seen the first signs of a slowdown in UK house price growth, with Nationwide reporting that annual house price inflation fell from 3.0% in April to 1.7% in May. Monthly prices also dipped by 0.6%.
According to Nationwide’s Chief Economist, Robert Gardner, the slowdown is likely linked to ongoing uncertainty in the Middle East and the resulting increase in energy prices. Given the impact these factors can have on consumer confidence, a slight loss of momentum is perhaps unsurprising.
However, there are still reasons to remain positive. Mortgage swap rates, benchmark interest rates that lenders use behind the scenes when setting mortgage rates, remain well below the levels seen during 2023 and are broadly similar to those experienced throughout 2024. As swap rates help influence the cost of offering fixed-rate mortgages, they are often a good sign of the direction mortgage prices might take. While recent global events have caused some market uncertainty, current pricing suggests only a slight reversal of the gains made earlier this year. If geopolitical tensions ease and energy prices begin to stabilise, this slowdown will hopefully be short-lived.
Looking at the wider market, regional variations continue to tell an interesting story. Zoopla reports that while house price growth is slowing nationally, areas across the North of England, Scotland and Wales are still seeing annual growth of between 2% and 3.6%. With property values remaining more affordable in these regions, improved mortgage affordability appears to be having a greater impact on buyer activity.
The North East is a good example of this trend. Despite a reported 20% fall in buyer demand, agreed sales are actually up by 6% compared to the same time last year. This suggests that while buyers may be taking a little longer to make decisions, demand remains strong for realistically priced properties.
London is also showing signs of improvement. After seeing price falls in recent months, the capital’s market appears to be stabilising, with agreed sales now running 8% higher than this time last year.
First-time buyers are now paying around £10,000 more for homes than a year ago, with the average first-time buyer property costing £254,750, up 4.3% year-on-year. This is helping to support prices, even though overall buyer demand is around 10% lower. While activity is softer overall, many first-time buyers who remain in the market appear focused on securing the right home rather than adjusting their expectations.
Overall, while May’s figures indicate that the market has softened slightly, there is little evidence to suggest a significant downturn. Buyer demand remains resilient, sales activity is holding up well and regional markets continue to perform strongly. As things stand, this looks more like a period of adjustment than the start of a sustained slowdown.
