House Prices Across the Country Climb Slightly After a Dip Following the Modification of Stamp Duty

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House prices jumped a bit in May, defying predictions of a slowdown, according to the latest Nationwide House Price Index.

The annual growth rate for houses nudged slightly higher in May, reaching 3.5%, up from 3.4% in April. These figures took a significant drop from the 3.9% growth seen in March.

Month-on-month, houses saw a 0.5% rise, the May data revealed, whereas April saw a 0.6% decline.

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Join Money MorningThe average house price is now £273,427, as stated by Nationwide.

Robert Gardner, Nationwide's chief economist, said, "Data showed a big spike in residential property transactions in March, with buyers rushing to complete purchases in order to avoid the additional stamp duty costs."

"Residential property transactions in March were around double the usual amount and were the highest since June 2021. This jump was also influenced by the stamp duty changes," he added.

Stamp duty benefits for first-time buyers declined from £425,000 to £300,000 on April 1, and for home movers, it dropped from £250,000 to £125,000, hiking up the cost of purchasing properties.

The housing market got a push at the start of the year due to the rush to seal deals before the stamp duty thresholds fell.

The data indicates that the market is coping well despite the subsequent increase in purchase costs for buyers from April 1.

Gardner said, "Despite economic uncertainties all over the world, the conditions for potential home buyers in the UK remain encouraging."

"Unemployment rates are low, wages are growing steadily despite inflation, household finances are strong, and borrowing costs are expected to decrease slightly if the interest rates drop further in the coming quarters," he added.

Should You Buy a House Now?

Borrowers are, on average, borrowing about 5.5 times their income to purchase a property with a mortgage, according to Nationwide and the Office for National Statistics. This figure is notably higher compared to the long-term average of 4.5.

Alice Haine, a personal finance analyst at Bestinvest, stated, "While some buyers are pushing through with their purchases, others might be mulling their choices more, as higher costs pose fresh challenges."

"First-time buyers may find it harder due to the additional stamp duty costs they now need to cover. This situation might make more lenders offer 100% mortgages to help first-timers step onto the property ladder, especially since some providers have already relaxed their affordability rules," Haine added.

Should You Remortgage Now?

Borrowing conditions have improved recently, helping the housing market stay afloat.

Mortgage rates have dwindled thanks to four interest rate cuts by the Bank of England since last August.

However, sticky inflation might slow down the pace of rate cuts moving forward, Haine suggested. This spike is due to a steep rise in household bills in 'Awful April' along with businesses passing the burden of increased employment costs onto consumers.

Haine said, "Nearly half a million homeowners who bought five-year fixed-rate mortgages at rock-bottom interest rates will be remortgaging this year. It will be essential for them to adjust their household budgets to accommodate higher repayment costs if they decide to roll off their existing deals."

"With uncertainty now becoming the norm, it may be better for first-time buyers or home movers to proceed with their purchases instead of waiting for perfect borrowing conditions. Plus, the traditional increase in property listings around this time of year provides buyers with more options and greater potential for negotiations," she added.

Enrichment Data:- The Stamp Duty Land Tax (SDLT) threshold was reduced from £250,000 to £125,000 on April 1, 2021, leading to higher costs for property buyers, especially for properties priced above £250,000.- First-time buyers now get 0% Stamp Duty on the first £300,000, and 5% on the portion between £300,001 and £500,000.- Investors and buyers of additional properties face a 5% SDLT surcharge for properties worth over £40,000, compared to the previous 3%.- The UK plans to introduce a Single Tax on Securities (STS) in 2027, replacing the current Stamp Duty and Stamp Duty Reserve Tax, which will affect the property market.

The current housing market conditions, with adequate finance opportunities and low unemployment rates, might encourage potential home buyers to invest in real estate.
The recent drop in mortgage rates, resulting from the Bank of England's interest rate cuts, can significantly benefit those looking to purchase a property or remortgage.
With the average house price at £273,427, as stated by Nationwide, investing in property requires careful consideration of personal finance and borrowing capacity.
Subscribing to the Money Morning newsletter keeps you updated on the latest investing and personal finance news, helping you make informed decisions regarding property investment and remortgaging.