House prices in Britain rose modestly in June, marking the second consecutive month of growth, according to high street lender Nationwide. However, economists warn that prices are likely to remain “flat at best” over the summer due to the impact of rising mortgage rates.
The latest figures from Nationwide show that the average price of a house in Britain increased by 0.2 percent in June compared to May. This puts house prices 1.5 percent higher than the same period last year, although they are still around 3 percent below the summer 2022 peak.
The typical house now costs £266,064, the highest price since October 2022, according to Liz Truss and Kwasi Kwarteng’s mini budget. Robert Gardner, Nationwide’s chief economist, noted: “Housing market activity has been largely flat over the past year.”
This time last year, few would have predicted that home prices would remain stable given the rapid rise in mortgage rates, which has reduced affordability for potential buyers and brought the previously booming pandemic-era housing market to a standstill.
Transaction volumes have been more affected than prices by the recent market decline. While sales are similar to last year’s levels, they are down 15 percent compared to 2019. “Transactions involving a mortgage have fallen even further, almost 25 percent, reflecting the impact of higher financing costs,” said Gardner. In contrast, cash transactions are up about 5 percent from pre-pandemic levels.
Industry experts believe that a shortage of homes for sale has helped support prices, with many people delaying their moving plans in the hope of better affordability. In addition, the market has seen few foreclosures, thanks to more accommodating banks, better stress testing and pandemic savings.
In recent months there have been signs of more homes coming onto the market, but mortgage rates, which were expected to fall in the summer, are still high. Andrew Wishart, senior UK economist at Capital Economics, said: “With signs that mortgage rates are reducing demand and improving supply, we think house prices will flatten at best in the coming months.” He had initially predicted an increase of 3 percent in 2024, but now expects a modest increase of 0.5 percent.
Gardner acknowledged that “housing affordability continues to be under pressure.” He calculated that a borrower earning the average UK income and purchasing a typical first-time buyer property with a 20 percent deposit would have a monthly mortgage payment equal to 37 percent of their take-home pay, well above the long-term salary. on average 30 percent.
Nationwide’s data shows that there is a persistent north-south divide in the UK housing market. Prices have generally risen in the northern regions over the past year, while in most areas south of Birmingham they have fallen. The fastest price increases were seen in North West England and Northern Ireland, where prices rose by 4.1 percent over the past 12 months. In contrast, house prices fell by 1.7 percent in the south-west of England, and by 1.3 percent in East Anglia. London was an exception in the south, with prices in the capital rising 1.6 percent compared to June last year.