UK house prices in February rose in annual terms for the first time in more than a year, Nationwide said on Friday, providing yet another indication that the housing market is on the road to recovery after a dip in mortgage costs.

The data reveals that house prices were 1.2% higher than in February last year, the first annual increase since January 2023, Nationwide said.

Prices rose by a monthly 0.7% between January and February this year, it said.

“The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market,” Nationwide chief economist Robert Gardner said.

The lender’s price gauge was now only 3% below an all-time peak touched in the summer of 2022, shortly before the market was hit by the Bank of England (BoE) raising interest rates and bond market turmoil under former Prime Minister Liz Truss.

Industry reactions: 

Jeremy Leaf, north London estate agent, said: “There tends to be an over-concentration on property prices when it comes to assessing how the housing market is performing. Prices impact buyer and seller confidence but transactions and affordability, which is most stretched in higher-value areas such as London, are arguably more relevant.

“In our offices, more valuations, listings and viewings combined with fewer fall-throughs than this time last year are feeding through to agreed sales, mortgage approvals and exchanges.

“However, while Nationwide reports another rise in prices, the market does remain price sensitive. Only competitively-priced properties are attracting attention. Sellers must price realistically or offers won’t be forthcoming and market improvement may not be sustained.”

Iain McKenzie, CEO of The Guild of Property Professionals, commented: “We’re expecting to see the house market back on the march this year, and a return to positive annual price growth is another good sign.

“Growth will be welcomed by sellers that have been cautious to stick out the ‘for sale’ signs since prices began to ease.

“Interest rates are holding steady, but we expect them to creep down through the year. Lenders have been offering better deals for first-time buyers in recent months and we hope to see that trend continue.

“This resurgence in activity is a promising sign that should bring more buyers out of hiding and encourage growth in the sector. We are already seeing this play out, with HMRC also recording an uptick in sales at the start of the year.

“While uncertainties remain, particularly surrounding future interest rate movements, the rebound of swap rates, which influence fixed-rate mortgage pricing, indicates a positive trajectory.

“The cost-of-living crisis remains obstinate, but as the stranglehold of surging inflation eases, mortgage affordability should become less of a worry.”

Tom Bill, head of UK residential research at Knight Frank, remarked: “Buyers feel confident that the only way for the base rate is down, which has seen demand and house prices pick up in recent months. However, the upwards pressure on mortgage rates in recent weeks shows sellers the importance of getting the asking price right. Banks are keen to lend and should eventually lower rates this year as inflation comes under control, which we believe will sustain positive annual growth in 2024 and see UK house prices increase by 3%.”

Nathan Emerson, CEO of Propertymark, commented: “The housing market always reacts to changing economic trends, so it is encouraging to witness many homeowners seeing both a month on month and year on year uplift on the price of their homes. This should help provide people with the confidence to potentially sell where they may have been holding back. The “UK Government need to build on this as a chance to prove that the economy is heading in the right direction.”

Matt Thompson, Chestertons’ head of sales, said: “Buyers have become increasingly confident since the end of last year when interest rates were held at 5.25% and mortgage rates started to come down. This sentiment carried through to January and February 2024. Meanwhile, sellers have also been feeling more optimistic about attracting the right buyer for their home which has led to a slight increase in the number of properties being put up for sale.”

Nicky Stevenson, MD of Fine & Country, commented: “Positive signs for the property market are turning from a trickle to a flood this year, with annual house price change increasing for the first time in 13 months.

“Demand is building as lower mortgage rates have encouraged buyers to restart their property search, and plunging inflation suggests better news is to come.

“Some buyers, assuming that we are at the peak of the rate rise cycle, are still waiting in the wings for the first downward nudge in interest rates before they return to the market. But this means there is a lot of pent-up demand that could soon be unleashed.

“We’re heading into one of the prime seasons for home sales, and sellers should look at this as a great time to get their home on the market.

“Properties tend to sell fastest at this time of year, and motivated buyers are still snapping up homes in desirable areas.”

Jonathan Hopper, CEO of Garrington Property Finders, added: “It’s a bounceback, not a blip. Nationwide’s data shows house prices have risen in four out of the past five months, and the upward momentum is now so strong that prices have climbed 1.2% compared to this time last year.

“Crucially the market has also become more free-flowing. For sale signs are starting to sprout from homes across the country, and estate agents report a steady uptick in interest from both buyers and sellers.

“Two things are driving this resurgence in activity – mortgages have become more affordable and there’s a widespread sense that house prices have definitively turned a corner.

“Increasing numbers of buyers who sat on their hands last year are deciding that now is the time to strike, before prices start to accelerate upwards.

“For many, the case for now is compelling. The Nationwide’s data shows that average prices are 3% lower than the highs recorded in the summer of 2022, and while interest rates are many times higher than their pre-Truss levels, mortgage borrowing is notably cheaper than it was last year.

“Many lenders have paused the flurry of interest rate cuts seen at the start of the year while they wait for the Bank of England’s next move, and a little bit of stability in borrowing costs may be no bad thing as further big cuts at this stage could prompt a resurgent market to get carried away.”