"While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates"
- Robert Gardner, Nationwide's chief economist
UK house prices edged up by 0.2% in June, resulting in the annual rate of growth rising from 1.3% in May to 1.5% in June, the latest Nationwide house price index shows.
The change leaves prices around 3% below the all-time high recorded in the summer of 2022.
Regionally, the index shows a mixed picture across Q2, with some regions seeing a modest pick up in growth, but others still recording annual price declines.
Northern Ireland remained the best performing area, with prices up 4.1% compared with Q2 2023. Across England overall, prices were up 0.6% compared with Q2 2023, while Wales and Scotland both saw a 1.4% year-on-year rise. Northern England continued to outperform Southern England, with prices up 2.4% year-on-year.
Southern England saw a 0.3% year-on-year fall, the same as last quarter. London remained the best performing Southern region with annual price growth maintained at 1.6%. East Anglia was the weakest performing region, with prices down 1.8% year-on-year.
Robert Gardner, Nationwide's chief economist, said: “Housing market activity has been broadly flat over the last year, with the total number of transactions down by around 15% compared with 2019 levels. Transactions involving a mortgage are down even more (nearly 25%), reflecting the impact of higher borrowing costs. By contrast, the volume of cash transactions is actually around 5% above pre-pandemic levels.
"While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates, which are still well above the record lows prevailing in 2021 in the wake 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% in late 2021, but in recent months this has been nearer to 4.7%.
“As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay - well above the long run average of 30%."
Foxtons CEO, Guy Gittins, commented: “The election may be looming but this has done little to deter the uplift in market activity seen in recent months, with UK house prices continuing to show positive signs of upward growth.
"It’s clear that homeownership remains high on the agenda and so far this year we’ve seen a notable increase both in terms of buyer enquiry levels and the number of sales being agreed.
"We expect that the market will remain resilient regardless of which political party comes out on top this Thursday and, with the addition of a base rate cut on the horizon, we anticipate a very busy end to the year for the UK housing market.”
Iain McKenzie, CEO of The Guild of Property Professionals, added: “This is the last litmus test on the state of the property market before the General Election and it is fair to say that while challenges remain, stability has returned to house prices in recent months.
“A modest rise in June follows the trend of steady price growth we have seen since the start of the year.
“While some may argue prices are stagnating, affordability concerns still loom for many Brits and there is a delicate balance to appease buyers and sellers alike.
“The regional picture is more mixed and we are seeing a greater adjustment in house prices happening in the South, where prices in many areas have been inflated for years.
“Meanwhile, regions in the North of England have seen higher levels of demand, creating a market that favours sellers.
“We would like to see first-time buyers being prioritised in the coming months, regardless of which party forms the next government. While house price growth is welcome news for sellers, it undeniably makes it harder for those still saving for a deposit to get on the property ladder.
“A renewed push to ramp up the rate of homebuilding would be a good place to start, particularly for properties that are considered more affordable.
“There is also the possibility that we may see a new Help to Buy scheme rolled out in the near future, which would go a long way towards encouraging potential buyers to get saving.”
