Nationwide: Following a decline following the stamp duty change, annual home prices push upward

The UK is in good shape for prospective homebuyers, according to experts

The most recent Nationwide House Price Index showed that house prices increased marginally in the year ending May, reversing earlier data that indicated a slowdown.

In May, the annual rate of house price growth increased slightly to 3 percent, up from 3 percent in April. In contrast to the 3 percent growth observed in March, the April figures represented a notable decline.

According to the May data, house prices increased by 0.5 percent month over month, while in April they fell by 0.6 percent.

The Nationwide report states that the average price of a home is currently 273,427.

"Official data confirmed that there was a significant jump in residential property transactions in March, with buyers bringing forward their purchases to avoid additional stamp duty costs," declared Robert Gardner, chief economist at Nationwide.

"Completions of owner-occupier home purchases were about twice as high as normal and the highest since June 2021, when stamp duty adjustments also had an effect.

The cost of purchasing a property increased when stamp duty relief for first-time buyers decreased from 425,000 to 300,000 on April 1st, and for home movers, it decreased from 250,000 to 125,000.

There was a rush to close deals before the stamp duty thresholds dropped, which helped the housing market at the beginning of the year.

Despite the subsequent increase in purchase costs for buyers starting in April, the data shows that the market is holding up.

The underlying conditions for prospective homebuyers in the UK are still favorable, Gardner stated, "despite broader economic uncertainties in the global economy."

"We and the majority of analysts anticipate that if the bank rate is further lowered in the upcoming quarters, borrowing costs will likely moderate somewhat, unemployment is still low, earnings are increasing at a healthy pace even after taking inflation into account, and household balance sheets are strong," he continued.

Is this a favorable moment to purchase a home?

Nationwide and Office for National Statistics data show that borrowers are borrowing slightly more than five times their earnings on average to purchase a home with a mortgage. This is much higher than the long-term average of four times.

Alice Haine, personal finance analyst at online investment platform Bestinvest, stated that although some buyers are obviously pushing forward with their purchases, others may now be carefully considering their options as rising costs present a new challenge.

"First-time buyers are most affected by lower stamp duty thresholds because they now have to save enough to cover a potentially sizable tax bill in addition to their deposit," she said.

Since many providers have already loosened their affordability standards in an effort to draw in more customers, this might encourage more lenders to provide 100% mortgages to help first-time borrowers get their foot in the door.

Is it wise to refinance at this time?

The housing market might be supported by the improved borrowing conditions in recent months.

As a result of the Bank of England's four interest rate reductions since last August, mortgage rates have lowered.

However, Haine noted that sticky inflation, which is caused by businesses passing on the cost of higher employment to customers and a sharp increase in the majority of household bills in April, may slow the rate-cutting momentum going forward.

The tariff policies of US President Donald Trump have also caused uncertainty around the world.

According to Haine, nearly half a million homeowners are scheduled to remortgage this year when they pay off their low-cost, five-year, fixed-rate mortgages that they obtained when interest rates were at an all-time low. However, they will need to modify their household budget to account for the nearly inevitable increase in repayment expenses.

"For many first-time homebuyers or movers who want to refinance their current mortgage in the near future, it might be better to move forward with a purchase rather than wait for the best borrowing conditions because uncertainty is becoming the new normal.

Additionally, buyers can benefit from the customary spike in listings during this time of year, as a larger selection of homes increases the likelihood of more intense price haggling.