Home prices rose 0.2 percent in June as high mortgage rates curb buyers

The UK’s average house price rose 0.2% month-on-month in June as high mortgage rates continued to hamper buyer activity, according to a report. The modest monthly rise leaves the average UK house price at £266,604, the Nationwide Building Society index showed, up 1.5% on the same period last year.

Prices rose at a slower pace than in May, when they rose 0.4% month-on-month, indicating a slight flattening of growth as the housing market remained subdued. Robert Gardner, Nationwide’s chief economist, said: “While earnings growth has been much stronger than house price growth in recent years, it has not been enough to offset the impact of higher mortgage rates, which are still well above record lows in 2021 as a result of the pandemic.”

“For example, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% at the end of 2021, but in recent months it has been closer to 4, 7% “As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay – well above the long-term average of 30%.

The total number of transactions was down about 15 percent from 2019, when prices were at a record high, Nationwide said. Transactions involving a mortgage fell further, by almost a quarter, reflecting the impact of higher borrowing costs, Mr Gardner added, while cash transactions are about 5% above pre-pandemic levels.

Mortgage rates remained stubbornly high after the Bank of England kept its key interest rate at 5.25% longer than expected in the second quarter. Earlier this year, economists expected the Bank to cut rates as soon as May or June, but policymakers voted to keep them on hold amid signs that some gauges of inflation have not yet fallen as quickly as anticipated .

The Nationwide index also included data for UK countries and regions, showing year-on-year changes in the three months to June. The figures showed that across England, house prices rose fastest in the North and Midlands, which saw a combined increase of 2.4% year-on-year.

The south of England saw a decrease of 0.3%. London was the best performing southern region with annual price growth held at 1.6%. East Anglia was the worst performing region, with prices down 1.8% year on year. Mr Gardner described it as “a mixed picture, with some regions seeing modest growth but others still seeing year-on-year price declines”.

Northern Ireland remained the best performing area in the UK, with prices increasing by 4.1% compared to the same period in 2023. Estate agent Jeremy Leaf, former residential chairman of the Royal Institute of Chartered Surveyors, said: “ The early spring optimism has all but disappeared. when it became apparent that any reduction in mortgage rates would be delayed.

“This reliable indicator of housing market health also shows that the election announcement had little impact on prices or activity and highlights how cash purchases are playing a bigger role. “Now that inflation has started to ease, expectations are growing that the key rate cut may not be delayed too long after all.”

Amy Reynolds, head of sales at estate agency Antony Roberts, said: “The situation is very worrying for first-time buyers. Home prices may have fallen a bit from their post-pandemic highs, but this is more of a correction than a downturn, and home ownership is still within reach for many, high borrowing costs not helping the situation.

“One trend we are seeing is people wanting to cut back financially to free up capital to live and pay the bills, which is extremely worrying. The real estate market tends to pick up after the election. If this election is followed by an interest rate cut in August, this would set the housing market up nicely for the autumn, removing uncertainty and increasing affordability.”

Here are the average house prices and annual house price change, according to Nationwide (the annual change figures compare the three months to June with a year earlier):

Northern Ireland, £190,300, 4.1%

North West, £213,580, 4.1%

Yorkshire and Humber, £206,653, 3.8%

North, £158,467, 2.9%

London, £525,248, 1.6%

West Midlands, £242,873, 1.4%

Wales, £207,650, 1.4%

Scotland, £181,186, 1.4%

East Midlands, £231,745, down 0.2%

Outer Metropolitan, £418,919, minus 0.5% (includes parts of Buckinghamshire, Hertfordshire and Surrey)

Outer South East, £331,995, minus 1.1% (includes parts of Bedfordshire, Oxfordshire and East Sussex)

South West, £301,139, down 1.5%

East Anglia, £270,597, down 1.8%