House prices are now around 3% below the all-time highs recorded in the summer of 2022 at £260,420, Nationwide said.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said: “The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market.
“Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.”
However, Gardner cautioned that near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates.
He added: “After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up.
“Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery.
“While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, suggested positive signs for the property market are turning from a trickle to a flood this year.
She said: “Demand is building as lower mortgage rates have encouraged buyers to restart their property search, and plunging inflation suggests better news is to come.
“Some buyers, assuming that we are at the peak of the rate rise cycle, are still waiting in the wings for the first downward nudge in interest rates before they return to the market. But this means there is a lot of pent-up demand that could soon be unleashed.
“We’re heading into one of the prime seasons for home sales, and sellers should look at this as a great time to get their home on the market.
“Properties tend to sell fastest at this time of year, and motivated buyers are still snapping up homes in desirable areas.”
Nathan Emerson, chief executive of Propertymark, added: “The housing market always reacts to changing economic trends, so it is encouraging to witness many homeowners seeing both a month on month and year on year uplift on the price of their homes.
“This should help provide people with the confidence to potentially sell where they may have been holding back. The UK Government need to build on this as a chance to prove that the economy is heading in the right direction.”
