Modest price increase recorded amid stable market conditions
UK house prices saw a slight increase in July, according to the latest Nationwide House Price Index.
The annual rate of growth reached 2.4%, up from 2.1% in June. The average price for a home now stands at £272,664, compared to £271,619 last month. On a monthly basis, prices rose by 0.6% after seasonal adjustment.
Robert Gardner, chief economist at Nationwide, said the market has shown resilience despite recent changes in the interest rate environment. “Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well,” he said.
“Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment. After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates.”
Gardner noted that the ratio of house prices to average income, now at about 5.75, is lower than the peak of 6.9 recorded in 2022 and is at its lowest level in over a decade. “This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan to value mortgages,” he said.
He added that the typical five-year fixed-rate mortgage stands at around 4.3% for those with a 25% deposit, down from highs of approximately 5.7% in late 2023.
Despite ongoing global economic uncertainty, Gardner said underlying conditions for potential home buyers in the UK remain supportive.
“Unemployment remains low, earnings are still rising at a healthy pace (even after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little further if bank rate is lowered further in the coming quarters as we, and most other analysts, expect. Providing the broader economic recovery is maintained, housing market activity is likely to continue to strengthen gradually in the quarters ahead.”
For Nathan Emerson, chief executive of industry body Propertymark, the latest Nationwide figures point to a stable market. “With continued talk of a gradual easing of interest rates, even while inflation remains above the Bank of England’s targeted rate of 2%, it is vital that this results in more affordable mortgage products for aspiring buyers and home movers,” he said.
“Many people are delaying paying off their mortgages until later in life via 35-year or 40-year mortgages. Therefore, a reduction in interest rates would be very welcome to help offset ongoing financial pressures and worries over the cost of living for many.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said lower mortgage rates are supporting the market. “Lower mortgage rates, with the expectation of more reductions to come, are giving the market impetus and putting borrowers in a stronger position when it comes to negotiating their property purchase,” he said.
“This, in turn, is keeping prices in check. With the markets expecting a further rate reduction next week, we could be in for a busy autumn. Lenders continue to trim their mortgage rates, while easing of mortgage lending rules should also enable borrowers to take on bigger mortgages in coming months.”
Verona Frankish, chief executive of estate agency Yopa, said July brought positive momentum for the market. “Recent improvements in mortgage market affordability, including the move to increase income lending multiples and the decision to launch a permanent Mortgage Guarantee Scheme, should help ensure that buyer activity remains consistent and house prices continue to strengthen,” she pointed out.
“However, it’s important to remember that the homebuying process remains challenging for many, and while market sentiment is positive, sellers must remain realistic when pricing for current market conditions if they wish to secure a sale.”
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