House prices jumped this month, according to the latest figures from Nationwide Building Society.
In percentage terms, house prices have gone up by 2.2 per cent year-on-year, up from just 1 per cent in February.
In the month of March alone, they went up 0.9 per cent – a figure that is adjusted for seasonal market ups and downs.
In cash terms, the typical home rose in value by around £4,000 over the last month, Nationwide revealed. The average property is now worth £277,186, up from £273,176 in February.
The market has ‘regained momentum’ after a slowdown at the start of the year, according to Robert Gardner, chief economist at Nationwide.
However, the sharp rise in mortgage rates and energy prices due to the Middle East conflict could dampen this.
Spring bounce: Despite prices jumping in March, the momentum is expected to be short lived due to rising mortgage rates
This is because financial market expectations for the future path of interest rates have shifted dramatically. This has resulted in mortgages rates rising.
Little more than a month ago, the lowest fixed rate deals on the market were below 3.5 per cent, but these have risen by almost 4.5 per cent since the beginning of the Iran war.
Gardner said: ‘Towards the end of March, three interest rate increases were priced in over the next twelve months, compared to two rate cuts being anticipated before the strikes on Iran.
‘This shift has resulted in a sharp rise in longer term interest rates (swap rates) that underpin fixed rate mortgage pricing.
‘If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years.
‘With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.’
Tom Bill, head of residential research at property firm Knight Frank, thinks it will take time for events in the Middle East to impact the property market.
‘The impact from the Middle East conflict on the housing market is still in the post,’ said Bill.
‘The fact mortgage offers last for six months means the effect of higher borrowing costs will filter into the market this spring and summer, putting downward pressure on prices and transaction volumes.
‘The longer-term impact hinges on the intensity and length of the conflict. That said, one mitigating factor is the amount of equity in the system and the fact more homes are now owned outright than with a mortgage.’
Prices down in the South East
While overall house prices are up, two regions saw annual price falls.
Prices in the South East and East Anglia are lower than a year ago, by 0.7 per cent and 0.4 per cent respectively.
London was the strongest southern region, with house prices rising 1.7 per cent over the past year.
House prices across another three regions are only up by less than 1 per cent. This comprises the West Midlands, East Midlands and the South West.
At the other end of the spectrum, Northern Ireland continued to outpace the rest of the UK by a wide margin, with prices increasing by 9.5 per cent over the year.
Scotland saw a pickup in annual house price growth of 3 per cent, closely followed by Wales, where prices were up 2.7 per cent year-on-year.
House prices in the North West of England still continue to see the the biggest leaps of any English region.
This includes areas such as Cheshire, Lancashire and Greater Manchester – with prices up 3.3 per cent year-on-year.
