0.7% increase in house prices but mortgage market 'fails' to recover

0.7% increase in house prices but mortgage market 'fails' to recover

30 March 2010 / by Rachel Mason

House prices in the UK rose slightly in March, but the number of mortgages taken out has failed to recover from January's dip, according to the Nationwide Building Society.

The average home in February cost £161,320, in March, the price was £164,159, an increase of 0.7% in the month.

"The price of a typical UK property rose by a seasonally adjusted 0.7% month-on-month in March, largely reversing the 0.8% month on month fall measured in February," explained Martin Gahbauer, Nationwide's Chief Economist, but said there is still a weakness in house sales.

"Preliminary figures show that the number of loans taken out for house purchases failed to recover from January’s large dip, suggesting that weakness in house sales at the start of the year may have been due to more than just the snowy weather," he said.

Mr Gahbauer, said that with "greater than usual political and economic uncertainty" ahead of the upcoming general election that potential homebuyers are proceeding cautiously but explained that because the number of homes for sales gas  "not increased appreciably" the impact of lower buyer activity on house prices has not been too negative.

"If this trend continues, we are likely to see relatively few properties changing hands, but with prices fairly stable," he said.

Commenting on Alistair Darling's announcement in the Budget last week that first time buyers would not have to pay stamp duty on homes worth up to £250,000, Mr Gahbauer said although it would save first time buyers £1,368 on average, looking back at house sales when the last stamp duty holiday was in place, it is unlikely to have a significant effect on the market as a whole.

"We of course do not know what the housing market would have looked like without last year’s stamp duty holiday, and it may well be that the level of transactions would have stayed even lower for longer, " he said,

"However, based on past experience it may not be enough on its own for the housing market to make a full recovery.”


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