UK house prices rose 0.3% month on month in July but the annual growth rate picked up to 2.1%, from 1.5% in June, marking fastest pace of growth since December 2022.
This is according to the latest Nationwide House Price Index which also reveals that prices are still around 2.8% below the all-time highs recorded in the summer of 2022.
Commenting on the figures, Nationwide’s Chief Economist Robert Gardner said: “Housing market activity has been holding relatively steady in recent months with the number of mortgages approved for house purchase at around 60,000 per month. While this is still around 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment.”
As an example Gardner pointed out that for borrowers with a 25% deposit, the rate on a five-year fixed rate deal has been around 4.6% in recent months, more than double the 1.9% average recorded in 2019.
“As a result, affordability is still stretched for many prospective buyers. Indeed, for an average earner buying a typical first-time buyer property, the monthly mortgage payment is equivalent to around 37% of take-home pay, well above the 28% prevailing pre-Covid and the long-run average of around 30%.
He added: “Investors expect Bank Rate to be lowered modestly in the years ahead, which, if correct, will help to bring down borrowing costs. However, the impact is likely to be fairly modest as the swap rates which underpin fixed-rate mortgage pricing already embody expectations that interest rates will decline in the years ahead.”
Quilter financial planner Holly Tomlinson said the latest house price index from Nationwide suggested that the property market had regained some degree of consistency. “With the economic outlook looking more predictable, both buyers and sellers who have been treading water for the past few months are now re-entering the market and buoying prices.”
Summer turning point
Fine & Country managing director Nicky Stevenson also reacted positively to the latest data. “July’s house price rise could mark a turning point for the property market and if interest rates drop today, optimists will be expecting a property boom in the latter half of 2024.
“This marks the fastest pace of growth since December 2022 and suggests renewed confidence in the housing sector and hopefully the start of a more stable period.”
She added:”It comes at a time when the broader economic picture is improving. Inflation has been held steady at the Bank of England’s target rate of 2%, meaning that measures taken to control rising prices are working.
Garrington Property Finders chief executive Jonathan Hopper insisted that after the election hiatus, the property market was starting to click back into gear.
“Even though July and August are traditionally quiet months for the property industry, the ‘back to school bounce’ is likely to start earlier and be stronger as would-be buyers who put their house-hunting on pause in the run-up to the election return in force.
“Official data released yesterday showed the number of home sales completed in June trod water, but many estate agents are now reporting a gentle uptick in new buyer enquiries and the market is slowly gaining momentum.”
However, he explained that activity is noticeably split. “Those already under offer are holding firm, but some buyers are revising their mortgage arrangements mid-transaction in order to take advantage of the more affordable interest rates launched in recent weeks. This is lengthening the time to exchange.
“Yet many buyers are finding their hand to be strong, as the high number of homes for sale in some areas means they can often drive a very hard bargain. Sellers are both pricing competitively and open to offering a price reduction in return for the certainty of a sale to a ‘proceedable’ buyer.”
He concluded: “The most lethargic area of the market is new buyers entering the process. With the distraction of the summer holidays this may be understandable, but it’s one to watch as the market stabilises.”
