UK housing prices rise in January fuelled by drop in high interest rates

According to data released by Nationwide Building Society, British housing prices surged higher this month, surpassing economists’ predictions and indicating a gradual relief from the pressure of high interest rates. The report revealed a 0.7% increase in house prices in January compared to the previous month, following a period of stagnation in December. This exceeded the 0.1% rise forecasted by economists.

Nationwide’s chief economist, Robert Gardner, noted some positive developments for prospective homebuyers as mortgage rates have been steadily decreasing. This shift reflects a change in investors’ perspectives regarding the future trajectory of the Bank Rate. In January, prices were 0.2% lower compared to a year ago, marking the smallest annual decline since January 2023. This contrasts with earlier forecasts predicting a 0.9% decline and a 1.8% fall in December.

Examining the period spanning three months until the end of January, prices surged by 1.1%, marking the most rapid increase since July 2022. This was just before the onset of the Bank of England’s (BoE) raising its interest rates and temporary bond market disruptions during Prime Minister Liz Truss’s tenure. The BoE is anticipated to maintain its Bank Rate at 5.25%, though it might revise down certain inflation projections. Economists speculate that this adjustment could pave the way for initiating interest rate reductions from mid-year onwards.

The Bank of England has reported that average mortgage rates decreased in December for the first time since November 2021. Despite the highest number of mortgages approved by lenders since June, the figures still lingered around 25% lower than pre-pandemic levels.

The housing market in Britain, much like in several Western nations, experienced a surge during the COVID-19 pandemic, fueled by historically low interest rates and the temporary increase in demand for larger living spaces as remote work became more prevalent.
Government data for November indicated a 2% decrease in British house prices from their peak in September 2022. However, they remained 24% higher than pre-pandemic levels.

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UK housing prices rise in January fuelled by drop in high interest rates

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