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UK house prices contracted further than expected in April, posting the steepest monthly fall in 20 months, as a tax levied on property purchases increased, according to lender Nationwide.
Prices fell 0.6 per cent month on month in April, below the zero growth forecasted by economists polled by LSEG, taking the average house price to £270,752, data showed on Wednesday. This was the largest monthly drop since August 2023, when prices contracted at the same pace.
Robert Gardner, Nationwide’s chief economist, said: “The softening in house price growth was to be expected, given the changes to stamp duty at the start of the month.
“Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.”
He added: “The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays.”
The data offers the first indication of the effect of stamp duty changes on the UK housing market. Stamp duty thresholds reverted to those pre-2022 levels on April 1, increasing the tax cost for many property buyers.
First-time buyers, for example, will start paying the levy for properties worth £300,000 or more, instead of the current £425,000.
Nationwide said house prices were still 3.4 per cent higher than in April last year, however, but lower than analysts’ expectations of 4.1 per cent and down from an annual rise of 3.9 per cent the previous month.
Gardner said he expected activity to pick up from the summer, supported by earnings rising at a faster rate than inflation, low unemployment levels and declining mortgage rates.
Swap rates, which underpin fixed mortgage pricing, have declined in recent weeks following the announcement of US tariffs on goods imported from most countries, which hit global growth prospects.
The Bank of England is widely expected to cut interest rates by a quarter point to 4.25 per cent when policymakers meet next week, with two to three more cuts priced in before the end of the year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said “sub-4 per cent mortgage rates are increasingly available and with cheaper fixed-rate mortgages and reversion rates for borrowers coming to the end of their current deals, it points to a lower rate environment going forward”.
Sandra Horsfield, economist at Investec bank, said a sustained downward trend in rates could “tempt more buyers into the market and lift house prices more visibly over the coming months”.