House prices are stuck in a holding pattern, with experts saying we need to see some serious cuts to mortgage rates before things really start to take off.

It’s all about the money, folks, and the Bank of England’s recent decision to keep interest rates steady is keeping a lid on things.

The good news is that house prices are showing some signs of life, with the Nationwide index reporting a 0.4% rise in May, bringing annual growth to 1.3%. This follows two months of price falls, so it’s a step in the right direction.

Why are rates so important?

Savills, a leading property consultancy, says lower mortgage rates are essential to kickstart more demand in the market. They’re worried that higher interest rates are making it too expensive for people to borrow money to buy a home.

The bad news is that the Bank of England isn’t expected to cut rates until August, and even then, they’re only forecasting one more cut for the whole of 2024.

A look at the numbers:

• Inflation: The recent inflation figures came in higher than expected at 2.3% in April. This means the cost of living is still rising, which puts pressure on the Bank of England to keep rates high.
• Mortgage rates: Despite a slight bump in swap rates, mortgage interest rates have stayed pretty stable in recent weeks.
• Supply: More sellers are entering the market, but demand isn’t keeping pace. This means we’re seeing a bigger supply of homes for sale, which could limit upward pressure on prices for now.
• Sales: The number of completed home sales is on the rise, showing a strong start to 2024. This suggests there is still some activity in the market, even if it’s not quite at pre-pandemic levels.

Don’t worry, it’s not all doom and gloom!

There’s still some positive momentum in the housing market. A general election is looming on July 4th, and historically, house prices have climbed in the years following an election.

Savills also notes that the market has been surprisingly resilient, holding up well despite the high cost of borrowing.

The bottom line:

For now, house prices are expected to remain relatively flat until we see some serious cuts to mortgage rates. But don’t lose hope! Experts believe the housing market is still in a good position to pick up steam once those rates start to fall.