House prices saw a monthly rise of 0.3% in July, Nationwide’s monthly House Price Index revealed.
The average price of a home grew to £266,334, slightly up from £266,064 in June.
The annual growth rate picked up to 2.1%, from 1.5% the month prior.
This figure marked the fastest pace of growth for the housing market since December 2022.
Robert Gardner, chief economist at Nationwide, said: “UK house prices increased by 0.3% month on month in July, after taking account of seasonal effects.
“This resulted in a slight pickup in the annual rate of house price growth from 1.5% in June, to 2.1% in July – the fastest pace since December 2022.
“However, prices are still around 2.8% below the all-time highs recorded in the summer of 2022.
“Housing market activity has been holding relatively steady in recent months with the number of mortgages approved for house purchase at around 60,000 per month.
“While this is still approximately 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment.”
He continued: “For example, for borrowers with a 25% deposit, the rate on a 5-year fixed rate deal has been around 4.6% in recent months, more than double the 1.9% average recorded in 2019.
“As a result, affordability is still stretched for many prospective buyers. Indeed, for an average earner buying a typical first-time buyer property, the monthly mortgage payment is equivalent to around 37% of take-home pay, well above the 28% prevailing pre-Covid and the long-run average of 30%.
“Investors expect Bank Rate to be lowered modestly in the years ahead, which, if correct, will help to bring down borrowing costs.
“However, the impact is likely to be fairly modest as the swap rates which underpin fixed-rate mortgage pricing already embody expectations that interest rates will decline in the years ahead.
“As a result, affordability is likely to improve only gradually through a combination of wage growth outpacing house price growth (which is expected to remain fairly flat), with some support from modestly lower borrowing costs.”
Reaction:
Guy Gittins, chief executive officer at Foxtons:
“Property market momentum has been building steadily so far this year and, despite macro headwinds and the surprise of a snap election, we’re yet to see this momentum show any signs of slowing.
“Bank of England data released earlier this week shows that monthly mortgage approvals are now sitting at consistently high levels as pent-up demand across the market has been released and this is helping to cultivate higher rates of house price growth across the UK market.
“At Foxtons, we’ve also noted a significant increase in both buyer enquiries and seller instructions since the start of the year and this is now bearing fruit with respect to the level of sales completing.
“Even if interest rates remain held at 5.25% today, this is unlikely to dampen the enthusiasm being shown by buyers and sellers, who are adopting a ‘life must go on’ attitude and pressing on with their plans to transact.”
Verona Frankish, CEO of Yopa:
“Whilst the summer sun may have only just made an appearance, the UK property market has been heating up for quite some time now and the uplift in buyer activity seen at the start of the year is finally starting to cultivate a consistent level of positive house price growth, with the market posting its best performance since December 2022.
“Regardless of whether rates are held or cut, homebuyers and sellers remain keen to make their move in 2024 and we expect that the second half of the year will prove even more fruitful.”
Ed Phillips, CEO of Lomond:
“The housing market has already put in an incredibly resilient performance so far this year and we’ve seen both buyers and sellers return to the fray, enticed by the greater degree of stability that has come as a result of a hold on interest rates and the anticipation of reductions in H2 2024.
“This uplift in activity has helped to stabilise house prices and we’ve now seen a consistent level of growth materialise in recent months.
“Whilst hopes of an interest rate cut later today may be a tad premature, we anticipate this growing market momentum to build further over the remainder of the year and it very much looks as though an Autumn rates reduction could well light the touch paper for further market prosperity.”
Marc von Grundherr, director of Benham and Reeves:
“The fastest rate of house price growth since December 2022 demonstrates just how much market conditions have improved so far this year and it’s clear that buyer confidence is high, despite the fact that interest rates are yet to come down.
“For those planning to make their move in 2024, now is the time to do so, as buyer demand is only likely to increase when interest rates are finally cut, making it very much a sellers market at present.”
Michelle Stevens, mortgage expert at finder.com:
“The UK property market has started to see some glimmers of hope over the last month, with mortgage providers finally beginning to compete when it comes to lowering rates, thanks to expectations of an upcoming base rate cut.
“Just last week we saw Nationwide introduce the first sub-4% mortgage rate since February, and many are hopeful this could be a sign that the market is about to heat up again.
“If the Bank of England follows through with expectations and lowers the base rate in the next couple of months, I’m confident that house prices will continue to see growth in the second half of this year.
“In fact, we recently polled a panel of experts, and 70% believe that house prices will rise by up to 2.5% by the end of this year.”
Holly Tomlinson, financial planner at Quilter:
“This morning’s house price index from Nationwide suggests that the property market has regained some degree of consistency, with another small uptick in house prices reported in June.
“UK house prices rose 0.3% month on month in July with the annual growth rate picking up to 2.1%, from 1.5% in June. This marks fastest pace of growth since December 2022.
“With the economic outlook looking more predictable, both buyers and sellers who have been treading water for the past few months are now re-entering the market and buoying prices.
“Later today, the Bank of England (BoE) is set to decide on whether to hold or cut its base rate, which will further influence the housing market’s dynamics.
“The BoE’s decision remains on a knife edge; a cut in rates or even a signal that a cut is on the near horizon will help mortgage rates fall further increasing confidence.
“Now inflation has returned to the Bank of England’s target rate of 2%, a rate cutting cycle should start in the not-too-distant future.
“This should bolster the housing market as prospective buyers become more willing to purchase a property in a stable or dropping interest rate environment.
“The monthly property transactions data for June which was released yesterday by HMRC paints a less rosy picture, as property purchases were marginally lower than in May, decreasing to 91,370 on a seasonally adjusted basis.
“The Government’s plans to increase the supply of newly built homes may also eventually stabilise house prices.
“A larger supply of homes will better soak up the significant demand in the UK, which serves to push prices ever higher.
“However, even if Labour succeeds in its plans to build 300,000 new homes a year, it will still take some time before any impact is reflected across the property market.
“Similarly, affordability remains a significant challenge.
“Even if prices stabilize, they are still far out of reach for most first-time buyers who have seen house prices rise far quicker than their pay packets, keeping that first rung of the property ladder just out of reach.”
Sam Mitchell, CEO of Purplebricks:
“Confidence flooded back into the housing market in July, particularly in the second half of the month.
“We have seen increases in viewings and offer activity following the outcome of the General Election and the end of the Euros as buyers look to get on with moves they had put on pause.
“As a result, house prices are rising. Banks have been competing more on rates and there were some mortgage offers being issued in record time this month.
“This benefits first-time-buyers especially as they look to leave the private rented sector or family homes.
“Greater accessibility to homeownership will reduce pressure on private renting and hopefully mean lower rents across the country in an increasingly challenging environment.”
Nathan Emerson, CEO of Propertymark:
“The housing market is regaining a real sense of positivity.
“Now that inflation appears to be staying within target it would further stimulate growth within the housing sector if the Bank of England feels confident enough to allow a slight interest rate cut when the Monetary Policy Committee (MPC) meets later today.
“It has been widely anticipated that they may look to lower the base rate, and at a time when we have a new Government who have committed to building near two million new homes by 2029, this combination of factors could lead to a rejuvenation for the housing sector.”
Nicky Stevenson, managing director at Fine & Country:
“July’s house price rise could mark a turning point for the property market and if interest rates drop today, optimists will be expecting a property boom in the latter half of 2024.
“This marks the fastest pace of growth since December 2022 and suggests renewed confidence in the housing sector and hopefully the start of a more stable period.
“It comes at a time when the broader economic picture is improving.
“Inflation has been held steady at the Bank of England’s target rate of 2%, meaning that measures taken to control rising prices are working.
“A rate cut by the Bank of England could be a potential game-changer for the property market. Lower interest rates typically translate into more affordable mortgages and we’re already seeing lenders respond with more competitive deals ahead of the decision later today.
“With the combination of rising house prices, stabilised inflation, and potentially lower interest rates, this could lead to a flurry of activity in the coming months – with more properties coming to market and a potential boost in transactions.
“But while these factors may fuel increased activity, the full effects will take time to unfold.
“Increased housing supply and ongoing affordability pressures will act as a counterbalance, and help to ensure that any market growth remains sustainable in the long term.”
Jonathan Hopper, CEO of Garrington Property Finders:
“After the election hiatus, the property market is starting to click back into gear.
“Even though July and August are traditionally quiet months for the property industry, the ‘back to school bounce’ is likely to start earlier and be stronger as would-be buyers who put their househunting on pause in the run-up to the election return in force.
“Official data released yesterday showed the number of home sales completed in June trod water, but many estate agents are now reporting a gentle uptick in new buyer enquiries and the market is slowly gaining momentum.
“However activity is noticeably split. Those already under offer are holding firm, but some buyers are revising their mortgage arrangements mid-transaction in order to take advantage of the more affordable interest rates launched in recent weeks. This is lengthening the time to exchange.
“Yet many buyers are finding their hand to be strong, as the high number of homes for sale in some areas means they can often drive a very hard bargain.
“Sellers are both pricing competitively and open to offering a price reduction in return for the certainty of a sale to a ‘proceedable’ buyer.
“The most lethargic area of the market is new buyers entering the process. With the distraction of the summer holidays this may be understandable, but it’s one to watch as the market stabilises.”
