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UK house prices rise unexpectedly in April as borrowing costs ease

UK house prices unexpectedly rose between March and April, according to data from mortgage provider Nationwide that suggests the property market is stabilising as borrowing costs ease.

Prices increased 0.5 per cent last month, ending seven consecutive months of decline and beating analysts’ forecasts of a 0.4 per cent fall.

Robert Gardner, Nationwide’s chief economist, pointed to “tentative signs of a recovery” in the property market reflecting recent improvement in consumer confidence and an easing of mortgage rates after the peak reached in the autumn following Liz Truss’s mini-Budget.

Consumer confidence rose to its highest level in more than a year in February. Mortgage approvals are expected to show the second consecutive increase in March, according to analysts’ forecasts of Bank of England data that will be published on Thursday.

“Buyers are finally making their move after months of waiting and stalling,” said Tomer Aboody, director of property lender MT Finance. He attributed the trend to expectations that inflation would fall sharply by the end of the year and that the Bank of England’s bank rate was approaching its peak.

House prices were down 2.7 per cent compared with April last year, Nationwide said. This is smaller than analysts’ forecasts of a 3.6 per cent fall and the 3.1 per cent drop in the previous month when it marked the largest contraction since the 2008-09 financial crisis.

Tom Bill, head of UK residential research at Knight Frank, said the property market was “returning to Earth rather than falling off a cliff”.

The average house price rose to £260,400 in April. While this is down from the peak of £274,000 in August, it is still £44,000 above the level in February 2020, before the first Covid-19 restrictions. This reflects the boom in the market boosted by record-low interest rates, making properties unaffordable for many households.

Solid nominal wage growth and easing mortgage rates could help affordability in the months ahead, but many economists said April’s rise in price was unlikely to be the start of a significant rebound.

Nationwide’s Gardner said any upturn was likely to remain “fairly pedestrian” as a result of the ongoing cost of living crisis and because mortgage rates were still higher than last year’s.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said he expected the housing market to bottom out only at the end of this year, resulting in an 8 per cent peak-to-trough fall in prices.

“Demand likely will remain weak enough to ensure that the stock of unsold properties continues to creep up and prices continue to fall,” said Tombs.

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