Market News

The uptick comes amid signs that activity in the housing market is holding up well, despite the end of the stamp duty break. Seasonally adjusted data shows that May’s price rise follows a 0.6% decline in April.

Robert Gardner, Nationwide’s chief economist, said: “Annual UK house price growth was marginally stronger in May at 3.5%, compared with 3.4% in April. House prices rose by 0.5% month on month, after taking account of seasonal effects.”

Gardner noted a sharp increase in residential property transactions in March, as buyers rushed to complete deals ahead of additional stamp duty costs.

“Owner-occupier house purchase completions were around twice as high as usual and the highest since June 2021 (which was also impacted by stamp duty changes),” he said.

“Mortgage approvals data suggests market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.”

He cited low unemployment, rising real wages, strong household balance sheets, and the potential for lower borrowing costs should the Bank of England cut interest rates in the coming months.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: "While the Bank of England cut interest rates in May, there is less certainty they will follow up with a fifth rate cut in June. The rate-setting Monetary Policy Committee will be keen to keep inflationary pressures at bay, not only from chancellor Rachel Reeves’ tax hikes on businesses but also any further threats from Trump’s tariff fiasco.

“Uncertainty is becoming the new normal and for many first-time buyers or home movers looking to refinance their existing mortgage soon, it may be better to push ahead with a purchase rather than wait for the ideal borrowing conditions.

"Plus, the traditional surge in listings at this time of year is a positive buyers can take advantage of, as a wider stock of homes to choose from raises the potential for heavier negotiation on price.”

A stamp duty holiday ended in March, with recent figures showing there was a stampede to get sales over the line before the deadline, followed by a transactions dip.

HM Revenue and Customs (HMRC) figures published last week showed an estimated 64,680 house sales took place in April – 64% lower than the 177,440 reported in March.

The study indicated the figures had been affected by changes to stamp duty rates which apply in England and Northern Ireland.

Nathan Emerson, CEO at Propertymark, said:“It is reassuring to witness consistent house price growth and a strong appetite as people continue to approach the homebuying and selling process, especially when the UK economy continues to adapt to both domestic and international events.

“With the rate of inflation still very much in sharp focus, it will be interesting to see what direction of travel the Bank of England may take regarding base rates when they meet again. Ultimately it would be welcome news for consumers should there be any further base rates cuts.

"However, the Monetary Policy Committee will likely be approaching any decision with extreme caution, especially considering many economists are predicting inflation to further rise."

Karen Noye, a mortgage expert at wealth manager Quilter said: “Mortgage rates continue to improve, meaning more buyers are finding the confidence to enter the market.

“Although lenders have started to reduce rates, many borrowers are still facing higher monthly costs than they would have a couple of years ago, particularly those coming off ultra-low fixed deals. Affordability stress testing also remains a barrier, with lenders continuing to apply caution particularly for those with smaller deposits or variable income.

“Some existing borrowers are resorting to term extensions or interest-only arrangements to ease the pressure on monthly budgets, but these are not long-term fixes and often result in higher overall repayment costs.

“The underlying issue is that property prices remain significantly out of line with average earnings, particularly in southern England, and that mismatch is limiting how far the market can stretch."

Nationwide’s analysis showed house prices surged in the countryside. Over the past five years, prices in rural areas have risen by 23%, compared with 18% in largely urban settings.

“Our recent special report identified that average house price growth in predominantly rural locations has continued to outpace more urban areas,” said Gardner. “The pandemic had a significant impact on housing demand during 2021 and 2022, with a shift in preferences towards more rural areas, particularly amongst older age groups.

"Whilst these effects have now faded, less urban areas have continued to hold the edge in terms of house price growth.”

The data showed that most home movers remained within the same type of area. “Our findings indicate that the majority (63%) of house moves were within the same type of area, with the biggest flow being within large towns or cities,” Gardner said.

However, migration patterns varied by age group. “Amongst those who moved to a different type of area, there was a significant difference by age group, with younger people (those aged 25-34) tending to move to more urban areas, and older age groups, particularly 55+, favouring more rural areas,” he added.