House prices returned to growth in July following a dip in the previous month, according to Nationwide’s latest House Price Index.
The average house price rose by 0.6% to £272,664, representing an annual growth rate of 2.4%, up from 2.1% in June. Purchase activity also remains buoyant, with 64,200 mortgages approved during the month.
The building society’s report also found that buying a property has reached its most affordable level in over a decade, although it is still close to six times the average wage in the UK.
Robert Gardner, Nationwide’s chief economist, said: “Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well. Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.”
“After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates.”
“While the price of a typical UK home is around 5.75 times average income, this ratio is well below the all-time high of 6.9 recorded in 2022 and is currently the lowest this ratio has been for over a decade. This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan-to-value mortgages.”
“Similarly, the interest rate on a typical five-year fixed-rate mortgage is around 4.3% (for a borrower with a 25% deposit). This is still over three times the all-time lows prevailing in autumn 2021, but well below the highs of c5.7% reached in late 2023.”
“Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.”
“Unemployment remains low, earnings are still rising at a healthy pace (even after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little further if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect.”
“Providing the broader economic recovery is maintained, housing market activity is likely to continue to strengthen gradually in the quarters ahead.”
Matt Thompson, head of sales at Chestertons, commented: “We have been seeing house hunters pausing their search amid the economic climate and level of interest rates, but many feel that the property market now provides a window of opportunity as more properties are up for sale. Last month alone, some of our branches have seen an evident uplift in the number of vendors wanting to sell, which has motivated more buyers to resume their search and make an offer. With the Bank of England likely to lower interest rates next week, we expect more buyers to proceed with their property search over the coming weeks.”
Director of Benham and Reeves, Marc von Grundherr, commented: “The monthly rate of house price growth has been unpredictable of late, however, July saw the decline of the previous month reversed and we continue to see a consistently strong performance where the annual rate of growth is concerned – which is a far better indicator of the health of the market.”
“This overarching air of positivity has been driven by buyers returning with confidence and, since March of last year, we’ve seen mortgage approvals remain above the 60,000 threshold. With this figure having also increased over the last two months, we can expect continued stability in house prices for the remainder of the year, as more buyers look to make their move.”
