UK house prices rose at the fastest annual rate since the end of 2022 when the property market was staggering from the impact of the disastrous Liz Truss mini-Budget.
Mortgage lender Nationwide reported that annual house prices rose to 2.1% in July, up from 1.5% in June. The average price of a property sold rose to £266,334.
Robert Gardner, Nationwide’s chief economist, said "prices remain around 2.8% below the heights hit in the summer of 2022. 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. Many buyers still faced affordability challenges and that with a typical first-time buyer property, the monthly mortgage payment is equivalent to around 37% of take-home pay, significantly above the 28 per cent pre-pandemic period.
Investors expect (the Bank of England base 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. Affordability is likely to improve only gradually through a combination of wage growth outpacing house price growth, with some support from modestly lower borrowing costs.”
Alice Haine, analyst at wealth managers Bestinvest by Evelyn Partners, said "the increase was a reflection of the growing confidence returning to the housing market despite “lingering affordability pressures” for buyers. A possible Bank of England interest rate cut would catalyse the market even further. “The housing market is exhibiting signs of a resurgence following its rocky ride in 2023 when high borrowing costs and low supply stifled activity.
The number of sales agreed in the four weeks to July 21 jumped 16% on the same period a year ago, according to separate data from Zoopla out this week. This follows a strong run in the first half of the year and agents now find themselves with the highest number of homes on their books in six years – a sign that sellers are returning to the market in droves in the hope of securing a good deal.“
House prices rise by more than expected
House prices rose by 0.8% in July following three flat months for the market, according to one of the UK's biggest mortgage lenders. Halifax said the average cost of a home rose by more than £2,200 to £291,268 last month, when compared with June.
The month-on-month increase was bigger than expected. Economists had forecast a rise of around 0.3%, according to a Reuters poll.
Annual prices also grew by 2.3%, the lender said on Wednesday.
It comes amid expectations of a pick-up in the market after the Bank of England cut interest rates on 2 August for the first time in more than four years.
The quarter percentage point reduction to 5% came after the period covered by Halifax's figures.
However, the banking brand's head of mortgages Amanda Bryden said "last week's cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder."
But she cautioned that "affordability constraints and the lack of available properties continue to pose challenges for prospective homeowners. Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year."
On a regional basis, Halifax said there had been strong growth in the North West, where month-on-month prices increased by 4.1%. The average property there is said to cost £232,489.
The lender said London continues to have the most expensive property prices, with the average home in the capital now said to be £536,052.
Economist Ashley Webb, from research firm Capital Economics, said "the nationwide rise was "further evidence that house prices are bouncing back from the slight rise in mortgage rates in the first half of this year. While we think the Bank of England will hold off until November before cutting interest rates again, the risks are now skewed to the next rate cut happening a bit sooner than we anticipate. That may mean house price growth accelerates quicker than we expect over the rest of this year."
Sam Mitchell, the chief executive of online estate agents Purplebricks, said "the growing confidence we've seen take hold of the housing market in recent weeks has been supercharged by the Bank of England's interest rate cut. With lenders already slashing mortgage rates in response to last week's decision, buyers are beginning to move ahead with purchasing decisions they have been putting off for months."