The latest data from Nationwide revealed house prices are up 0.2% in June on a monthly basis, when adjusted for seasonal effects. Meanwhile, prices are up 1.5% year-on-year. The average house in the UK now costs £266,064.
Prices are now “around 3% below the all-time high recorded in the summer of 2022”, according to Nationwide’s chief economist Robert Gardner. This suggests the housing market is continuing to recover after taking a hit in the wake of Liz Truss’s mini-Budget in September 2022, when mortgage rates skyrocketed.
Despite this, Gardner notes that “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”. He adds that transactions involving a mortgage have fallen even more than this, suggesting higher interest rates are dampening the property market.
Higher rates pose a particular problem for those relying on a large loan to fund their next move – whether that’s first-time buyers or those looking to upsize. Meanwhile, cash buyers are coming to the market more freely, with cash transactions now 5% above pre-pandemic levels.
Affordability issues remain – when will mortgage rates fall?
“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,” Gardner explains. Recent research from Zoopla revealed the average house is still almost £20,000 above affordability levels .
The Bank of England has been holding the base rate at a sixteen-year high since August last year. However, the good news is that interest rates are expected to be cut later this year, potentially as soon as 1 August. Some lenders have already started reducing mortgage rates in anticipation, including NatWest, Barclays and HSBC.
This should give mortgage holders some relief if they are about to roll off a relatively cheap five-year fixed deal. That said, interest rates are expected to come down gradually and are unlikely to return to ultra-low, pre-pandemic levels any time soon.
“Millions more mortgage holders are yet to feel the pain of higher interest rates because they remain protected by cheaper rates arranged before the BoE’s rapid series of rate rises started in late 2021,” explains Alice Haine, personal finance analyst at Bestinvest.
“It means more than 3 million homeowners are still paying interest rates of less than 3%, significantly below the current average for two and five-year fixes that sit comfortably above the 5% mark,” she adds.
Where in the UK are house prices rising the most?
If you had bought a house a year ago, you would have seen a better return on your investment in the north than the south. The latest regional data from Nationwide reveals house prices in Northern England are up 2.4% year-on-year. Meanwhile, Southern England has seen a 0.3% fall. London bucked the trend, however, with prices rising 1.6% in the capital.
This could suggest house prices are hitting more of an affordability ceiling in the south – the average house price across all southern regions has now hit £369,580, versus £210,664 in the north. Northern Ireland was the best-performing area overall, though. Nationwide reveals that prices in the region rose 4.2% year-on-year. Meanwhile, Scotland and Wales both saw increases of 1.4%.
A rise in house prices is good news for those already on the property ladder, but more of a challenge for those who are looking to get a deposit together for their first place. If that’s you, take a look at our recent article on the most affordable places for first-time buyers .
Of course, the reality is that many buyers don’t have the luxury of choice and need to live near family, schools, or their place of work. Hopefully the pledges announced by Labour and the Conservatives in the lead-up to the general election will give some first-time buyers the boost they need.
Labour has promised to extend the existing mortgage-guarantee scheme through its “freedom to buy” policy , while the Conservatives have said they will deliver a new “Help to Buy” equity loan scheme. The Conservatives have also promised to permanently raise the stamp duty threshold for first-time buyers to £425,000.
Is now a good time to buy or sell a house?
The fact that transactions remain subdued suggests it could be a buyers’ market. You may find you are able to drive a hard bargain and arrive at a better price. Of course, that’s assuming buyers can afford to take out a mortgage at current rates.
If you are thinking about buying a property , you might be tempted to wait for the Bank of England to cut rates before taking action, but that isn’t the perfect solution either. Once rates are cut, house prices could rise further – so it’s a bit of a catch 22.
What’s more, leave it too long and you could be hit by higher stamp duty. In 2022, the government temporarily increased the residential nil-rate threshold from £125,000 to £250,000 for regular buyers, while increasing it from £300,000 to £425,000 for first-time buyers. However, this temporary measure comes to an end on 31 March 2025.
While the Conservatives have promised to permanently increase the first-time buyer threshold if they win the upcoming general election, Labour has said it will not match this pledge .
The current environment is proving frustrating for many sellers too, with houses taking longer to shift. Sellers will be hoping that interest rate cuts boost buyer demand. As well as making it quicker and easier to sell, this could also push up the value of their home.
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