House prices made a surprise recovery in April, as the remarkable resilience of the UK housing market trumped the hit to consumer confidence caused by the Iran war, according to Nationwide's latest house price index.
Annual growth climbs to 3%
Annual house price growth in the UK climbed to 3% last month, up from 2.2% in March. National house prices grew by 0.4% month-on-month, putting the average UK house price at £278,880.
Leading figures in the property market had warned that expectations of higher interest rates due to the Iran war would cause Brits to delay house purchases until mortgage conditions improved. However, Friday's figures suggest the housing market is regaining momentum after a slow winter period, during which the property market stuttered in its recovery from pre-Budget speculation.
House prices grow despite falling confidence
Robert Gardner, Nationwide's chief economist, said Britain's housing market has managed to gain momentum despite fears of high mortgage rates, buoyed by the relative strength of household finances. This comes despite consumer confidence falling to its lowest level in more than two years, marking the third consecutive monthly drop.
The Royal Institution of Chartered Surveyors reported a sharp fall in new buyer enquiries in March, suggesting Brits are preparing to wait out the economic chaos caused by the conflict in the Middle East. But Gardner said Brits are not yet seeing a squeeze on their finances comparable to recent cost of living crunches, with household debt at its lowest level relative to income for around two decades.
"Moreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in mortgage rates," he said.
Mortgage rates could rise
Jason Tebb, president of property portal Onthemarket, said: "Despite the challenging economic backdrop, the housing market continues to demonstrate the resilience it has become known for. The Bank of England's decision to hold interest rates for another month should also have a steadying effect on momentum in the market, suggesting stability and no need to panic."
On Thursday, the Monetary Policy Committee opted to hold interest rates, but signalled that hikes could be on the horizon. But Gardner warned this recovery could stall: "Looking ahead, UK economic growth is likely to be somewhat weaker and inflation higher than previously expected as a result of developments in the Middle East."
Earlier this month, property experts Knight Frank and banking giant Barclays both slashed their forecasts for this year's house price growth.
