House prices rise for tenth consecutive month

Nationwide’s house price index showed that prices increased by 11.2% in the year to May 2022. This was down from 12.1% in April 2022, and a peak of 14.3% in March 2022.

May’s price increase was better than forecast, as the supply of homes on the market remained relatively low, maintaining an upward momentum on house prices.

Robert Gardner, chief economist at Nationwide, said: “Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high.”

However, he warned of high interest rates and a drop in take-home pay impacting the market going forward as the year progresses, and inflation continues to affect household finances.

In April 2022 inflation soared to a 40-year high of nine percent, with the Bank of England (BoE) expecting it to rise to over 10%.

Gardner continued: “Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”

Gabriella Dickens, senior UK economist at consultancy Pantheon Macroeconomics, added: “The slowdown in the year-over-year growth rate of Nationwide’s measure of house prices is further evidence that buyer demand is cooling, as mortgage rates surge and real incomes fall.

“We expect house prices to merely hold steady in the second half of this year, leaving the year-over-year growth rate at around five percent by the end of this year.”