House prices nudge up 0.2% in June as high mortgage rates restrict buyers

The average UK house price rose by 0.2% month on month in June, as high mortgage rates continued to hold back buyer activity, according to a report.

The modest monthly growth leaves the average price of a house in the UK at £266,064, the index by Nationwide Building Society showed, up 1.5% on the same time last year.

Prices rose at a slower rate than in May, when they increased by 0.4% month on month, indicating a slight flattening in growth as the housing market remained subdued.

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

Robert Gardner, Nationwide’s chief economist, said: “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%.”

The total number of transactions is down by about 15% compared with 2019, when prices were at a record high, Nationwide said.

Transactions involving a mortgage are down even more, by nearly a quarter, reflecting the impact of higher borrowing costs, Mr Gardner added, while cash deals are about 5% above pre-pandemic levels.

Mortgage rates have remained stubbornly high after the Bank of England held the base interest rate at 5.25% for longer than expected during the second quarter.

Earlier this year, economists had expected the Bank to cut rates as soon as May or June, but policymakers voted to hold them amid signs that some inflation indicators had still not fallen as fast as anticipated.

Early spring optimism all but disappeared when it became apparent that any reduction in mortgage rates would be delayed ... Now that inflation has started to fall, expectations are growing that the drop in base rate may not be delayed too long after all

Nationwide’s index also included data for the UK’s nations and regions, showing annual changes during the three months to June.

The figures showed that, within England, house prices rose fastest in the North and the Midlands, which saw combined growth of 2.4% year on year.

Southern England saw a 0.3% fall. London was 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.

Mr Gardner described it as “a mixed picture, with some regions seeing a modest pick-up in growth, but others still recording annual price declines”.

Northern Ireland remained the best-performing area in the UK, with prices up 4.1% compared with the same period in 2023.

Estate agent Jeremy Leaf, former residential chairman of the Royal Institute of Chartered Surveyors, said: “Early spring optimism all but disappeared when it became apparent that any reduction in mortgage rates would be delayed.

“This reliable indicator of housing market health also shows how the election announcement had little impact on prices or activity and underlines how cash purchases are playing a more important role.

“Now that inflation has started to fall, expectations are growing that the drop in base rate may not be delayed too long after all.”

House prices may have come off a little from their post-pandemic highs but this is more of a correction than a fall and home-ownership is still out of reach for many, with high borrowing costs not helping the situation

Amy Reynolds, head of sales at estate agency Antony Roberts, said: “The situation is very concerning for first-time buyers.

“ House prices may have come off a little from their post-pandemic highs but this is more of a correction than a fall and home-ownership is still out of reach for many, with high borrowing costs not helping the situation.

“One trend we are seeing is people looking to financially downsize to release capital to live on and pay bills, which is hugely concerning.

“The property market tends to pick up after an election. If this election is followed by an interest rate cut in August, this would set the housing market up nicely for the autumn, dispelling uncertainty and boosting affordability.”

Here are average house prices and the annual house price change, according to Nationwide (the annual change figures compare the three months to June with a year earlier):

Northern Ireland, £190,300, 4.1%

North West, £213,580, 4.1%

Yorkshire and the Humber, £206,653, 3.8%

North, £158,467, 2.9%

London, £525,248, 1.6%

West Midlands, £242,873, 1.4%

Wales, £207,650, 1.4%

Scotland, £181,186, 1.4%

East Midlands, £231,745, minus 0.2%

Outer Metropolitan, £418,919, minus 0.5% (includes parts of Buckinghamshire, Hertfordshire and Surrey)

Outer South East, £331,995, minus 1.1% (includes parts of Bedfordshire, Oxfordshire and East Sussex)

South West, £301,139, minus 1.5%

East Anglia, £270,597, minus 1.8%