Nationwide Building Society has reported that UK house prices increased up by 0.2% in June, after taking account of seasonal effects.
The annual rate of growth rose from 1.3% in May to 1.5% in June, leaving prices around 3% below the all-time high recorded in the summer of 2022.
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%.
“Our regional house price indices are produced quarterly, with data for Q2 (the three months to June) showing a mixed picture, with some regions seeing a modest pick up in growth, but others still recording annual price declines (see full table on page 4).
“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 (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands), continued to outperform southern England, with prices up 2.4% year-on-year.
“Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) 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.”
Karen Noye, mortgage spokesperson at Quilter, added: “As we approach the general election, while any immediate impact on house prices might be minimal, the future policies of the next government will be crucial in shaping the housing market over the long term.
“Labour’s ambitious pledge to build 1.5 million homes over five years presents a significant opportunity to address the UK’s housing crisis. By reforming the planning system and utilising brownfield and ‘grey belt’ sites, Labour aims to increase housing supply, making homeownership more accessible for younger generations. Whether this becomes a reality though is yet to be seen, lofty targets are often bandied around during election campaigns and then missed.
“Similarly, Labour’s “freedom to buy” scheme, which seeks to make the mortgage guarantee a permanent fixture is unlikely to move the dial much for young people’s hopes of homeownership. It fails to address deeper issues of affordability and high property prices relative to average incomes. First-time buyers often struggle with borrowing limits, and high loan-to-value ratios increase the risk of negative equity, leaving new homeowners vulnerable if house prices fall.
“On the Conservative side, their housing policies have focused on supporting first-time buyers through initiatives like Help to Buy and the Starter Homes scheme. The Conservatives have pledged to permanently abolish stamp duty for properties up to £425,000 for first-time buyers and to scrap Capital Gains Tax for landlords selling to sitting tenants, aiming to free up more housing stock from the private rental sector.
“The current market conditions, characterised by high mortgage rates, continue to be a significant hurdle for many buyers. The Bank of England will eventually drop the base rate, but it is still uncertain when this will happen which heaps paralysis on the market. This, more than anything either party can do in the short term, determines house prices.”