The average house price increased month-on-month in February for the sixth month in a row, however, changes to stamp duty in April could lead to weakness in the market, says Nationwide.
The Nationwide house price index showed property values rose 0.4% month-on-month in February to £270,493.
House prices rose 3.9% year-on-year, similar to the annual pace of growth seen in January.
Robert Gardner, chief economist at Nationwide, said: “Housing market activity has remained resilient in recent months, despite ongoing affordability challenges. Indeed, the second half of 2024 saw a noticeable pick up in total housing transactions, which were up 14% compared with the same period in 2023.”
Gardner said that first-time buyer activity continued to recover, with mortgage completions in 2024 just 5% below pre-pandemic levels. This comes despite interest rates being higher, with five-year fixed mortgage rates currently around 4.4% compared to 2% in 2019.
However, he warned that changes to stamp duty at the start of April are likely to have an effect.
“The changes to stamp duty are likely to generate volatility in transactions in the near term, as buyers bring forward their purchases to avoid the additional tax. This will likely lead to a jump in transactions in March, and a corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes,” he added.
Karen Noye, mortgage expert at Quilter, said: “The Government’s decision not to extend the increase to the stamp duty threshold will pile even more pressure on prospective first-time buyers in particular. Those who have been scrimping and saving to build an adequate deposit will soon find themselves facing a hefty tax bill of up to £5,000, eroding affordability further and making homeownership all the more expensive.
“On a slightly more positive note, the Bank of England’s recent interest rate cut has seen lenders trim mortgage rates which should help ease affordability pressures somewhat. While inflation is higher than the Bank would like, the need to stimulate the economy could result in further cuts and we could see demand for housing picking back up. However, the lack of supply means that even though monthly payments may become more manageable, securing a home could still present a challenge and prices may remain inflated.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “While property prices are expected to remain resilient in the first quarter, partly a reflection of base rate cuts and the stamp duty deadline, it will be interesting to see whether that momentum continues beyond April.
“Affordability levels may be improving, albeit very slightly, but they remain severely stretched by historical standards. Mix that in with property tax increases, rising living costs from April, job uncertainty and the potential for wage growth to slow and some sellers may be compelled to adjust asking prices downwards to secure a sale.”
