The latest figures from Nationwide reveal a modest increase in UK house prices for June, despite the ongoing challenge of elevated mortgage rates.
The average price of a home in Britain rose by 0.2 per cent in June compared with May, according to Nationwide. This positions house prices at 1.5 per cent higher than the same period last year, yet they remain approximately 3 per cent below their peak in the summer of 2022. The typical home price now stands at £266,064, marking the highest figure since October 2022, following the mini-budget introduced by Liz Truss and Kwasi Kwarteng.
Nationwide’s chief economist, Robert Gardner, observed, “Housing market activity has been broadly flat over the last year.” A year ago, the prevalent sentiment would not have anticipated stable house prices in the face of swiftly rising mortgage rates. These increased rates have diminished affordability for potential buyers, effectively halting the previously thriving pandemic-era housing market.
Transaction volumes have been more impacted than prices by the recent market downturn. While sales levels are comparable to last year’s, they are 15 per cent lower than in 2019. Gardner highlighted, “Transactions involving a mortgage are down even more, nearly 25 per cent, reflecting the impact of higher borrowing costs.” Conversely, cash transactions have risen by about 5 per cent compared to pre-pandemic levels.
Industry experts attribute the support for house prices to a shortage of properties for sale, as many individuals have postponed moving plans in anticipation of better affordability. Additionally, the market has witnessed a limited number of forced sales, aided by more accommodating banks, improved stress-testing, and savings accumulated during the pandemic. Although recent months have indicated an increase in homes entering the market, mortgage rates, which were expected to decrease over the summer, have stayed elevated. Andrew Wishart, senior UK economist at Capital Economics, remarked, “With signs that mortgage rates are causing demand to falter and that supply is improving, we think that house prices will flatline at best over the coming months.” Initially predicting a 3 per cent rise in 2024, Wishart now foresees a modest 0.5 per cent increase.
Gardner underscored that “housing affordability is still stretched.” He calculated that an average UK income earner purchasing a typical first-time buyer property with a 20 per cent deposit would allocate 37 per cent of their take-home pay to the monthly mortgage payment, significantly above the long-run average of 30 per cent.
Nationwide’s data illustrates a persistent north-south divide in the UK housing market. Over the past year, prices have generally risen in northern regions while declining in most areas south of Birmingham. The most significant price increases were recorded in northwest England and Northern Ireland, both at 4.1 per cent. In contrast, house prices fell by 1.7 per cent in southwest England and by 1.3 per cent in East Anglia. London presented an exception in the south, with capital prices rising by 1.6 per cent year-on-year.
In summary, while UK house prices saw a slight increase in June, the housing market’s future remains uncertain amidst high mortgage rates and varying regional trends.
