UK house price inflation eased for the first time in six months in April, at a faster than expected pace, and the housing market is expected to slow in the coming months due to the high inflation that is putting pressure on household income and rising interest rates.
The house price index rose 12.1 percent year-on-year in April after a 12.3 percent increase in March, survey results from the Nationwide Building Society showed Friday.
Economists had forecast an easing to 12.6 percent. The latest inflation was the slowest in three months.
House price inflation slowed for the first time since November.
Compared to the previous month, house prices rose 0.3 percent in April, after a 1.1 percent gain in March. Economists had forecast a 0.8 percent increase. Prices rose for a ninth month and the latest monthly gain was the weakest in seven months.
Housing demand has been underpinned by a robust labor market and the low stock of homes is putting upward pressure on house prices, Nationwide said.
Nationwide Chief Economist Robert Gardner expressed surprise that the housing market continue to remain so buoyant given mounting pressure on household budgets that has hurt consumer confidence.
Further, housing affordability has deteriorated as house price growth has been outstripping income growth by a wide margin over the past two years, while more recently borrowing costs have increased.
A survey by the Nationwide among 3,000 customers showed that 38 percent were actively moving or considering a move.
A sizable minority, 17 percent, suggested that they were moving or considering a move to reduce the pressure on their household budgets by moving to a different area or to a smaller property.
“The squeeze on household incomes is set to intensify with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high,” Gardner said.
“Moreover, assuming that labor market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.”
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