The annual rate of house price growth slowed to 2.1% in June, from 3.5% in May, data from Nationwide’s latest House Price Index has revealed.
This slowdown reflects a more subdued market following a brief period of acceleration earlier in the year.
The average house price in June stood at £271,619, down from £273,427 in May, indicating a slight monthly decline.
The monthly house price index also fell from 541.6 in May to 537.3 in June, corresponding to a monthly change of -0.8%, a reversal from the 0.4% increase reported the previous month.
Among the UK regions, Northern Ireland continued to lead the market, recording the strongest annual growth rate at 9.7%.
In contrast, East Anglia was the weakest performer, with house prices rising just 1.1% year-on-year.
Robert Gardner, Nationwide’s chief economist, said: “UK house price growth slowed to 2.1% in June, from 3.5% in May.
“Prices declined by 0.8% month-on-month, after taking account of seasonal effects.
“The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April.”
He added: “Nevertheless, we still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.
“The unemployment rate remains low, earnings are rising at a healthy pace in real terms (i.e. after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we and most other analysts expect.”
Reaction:
Rosie Hooper, chartered financial planner at Quilter Cheviot:
“The latest data from Nationwide shows house prices fell by 0.8% in June, bringing annual growth down to 2.1%.
“This marks a considerable softening compared to last month’s figures, which saw 0.4% monthly growth and 3.5% on an annual basis, and highlights a housing market still adjusting to high borrowing costs and shifting buyer sentiment.
“Affordability remains a huge hurdle for many buyers. While the effective interest rate on new mortgages edged down slightly to 4.47% in May, repayments are still considerably higher than just a few years ago. Many prospective buyers, particularly first-time purchasers, face tough affordability assessments and elevated upfront costs following the changes to stamp duty.
“That said, recent data from the Bank of England shows signs of life returning to the mortgage market. Net borrowing of mortgage debt rose by £2.1bn in May, following a sharp drop in April, while gross lending jumped to £20.4bn, which is the highest level since January. Mortgage approvals for house purchases also rose for the first time this year, increasing to 63,000. Though still below historic norms, this suggests that buyer confidence is starting to return in dribs and drabs.
“While the market is still digesting the stamp duty reforms in April, they will soon become the norm, and their immediate impact will fade into the rear-view mirror. First-time buyers and movers alike are already beginning to adjust to the new thresholds, which should help stabilise activity over the coming months.
“Geopolitical risks also linger in the background. Tensions in the Middle East appear to have calmed for now, but any renewed escalation could push up inflation and reignite pressure on interest rates, potentially affecting mortgage pricing later this year.
“We are not far away from the summer holidays starting which can be a quieter period for the housing market, as many households prioritise holidays over house hunting. With schools off and professionals away, activity often slows across the board, from viewings to mortgage processing, leading to a natural lull in transactions.
“This may already be weighing on house prices, and we could see further downward pressure in the coming months. However, a seasonal dip is nothing new. Prices could fall slightly more over the period, but we may not see any major price movements until the market begins to warm up again in early autumn, when buyers and sellers return with renewed focus.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“While many sellers are reducing asking prices to attract interest, we’re still agreeing a strong number of sales – and prices are largely holding firm. We’re also seeing buyers lose out because they hesitated, expecting further price drops, only for someone else to come in and secure the property.
“My advice to buyers is simple: if you like a property, make an offer. The worst that can happen is it’s rejected. Don’t wait for the bottom of the market – you’ll only know when it was in hindsight, and if the right property isn’t available at that exact moment, you won’t benefit anyway.
“If you find the right home now, go for it. Treat it as a place to live, not just an investment.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Moderating house price growth is good news for the wider health of the housing market, making home ownership more realistic for first-time buyers, many of whom are already relying on the Bank of Mum and Dad.
“Lenders have been reducing mortgage rates and enhancing loan-to-incomes, increasing the size of loan that some borrowers can access. However, while the borrowing environment may be easing, higher inflation and the wider economic picture remains a concern, which could mean the pace and size of further base rate reductions is more gradual than markets thought only a short while ago.”
Jason Tebb, president of OnTheMarket:
“There is still plenty of evidence of steady activity in the housing market, despite a considerable number of buyers bringing forward transactions in order to take advantage of the stamp duty holiday before it ended in March. Average house prices are being kept in check by the increase in stock, which exceeds supply in some areas.
“Interest-rate reductions are more important than ever in order to boost activity and momentum in the market now that the stamp duty holiday is no longer available. Four quarter-point base-rate cuts since last August have made all the difference to affordability and the ability to plan ahead with confidence. Further reductions will give the market added impetus as we head into the latter half of the year.
“Mortgage lenders continue to gently trim rates and ease criteria, which is further assisting borrowers dealing with stubborn inflation and the elevated cost of living.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “In our offices, the amount of stock presently overhanging the market has not only resulted in lower prices as seen in these figures, but has meant more protracted transactions.
“Looking forward, only realistically-priced properties which stand out from the crowd will continue to attract attention as worries about the economy and inevitable tax rises on the horizon play their part.”
Gareth Lewis, deputy CEO of specialist lender MT Finance:
“Softening house price growth is not necessarily a bad thing when buying a home remains beyond the means of many. There are so many considerations when looking to purchase – stamp duty is a big concern, particularly now that the concession has been removed, while the high cost of living isn’t easing and interest rates haven’t come down as quick as many hoped. With so many things to consider, it is no wonder that demand is suppressed.
“While softening prices will help those trying to buy, they are still a long way off where they need to be. Something has to change because prices remain overinflated – whether that be another reduction in stamp duty or further interest rate reductions.
“Building more affordable homes is a step in the right direction but it’s not a quick solution, particularly given the archaic planning system which takes forever.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“Today’s Nationwide data showing a moderation in annual price growth is not a sign of a weakening market, but rather evidence of a market that is maturing and finding a healthier, more sustainable balance.
“While headlines may focus on the slowdown in price inflation, the real story is in the sheer volume of activity. The recent 25% month-on-month surge in property transactions demonstrates that the desire to move remains incredibly robust. Following the artificial lull created by the stamp duty deadline in March, genuine, underlying demand is now firmly back in the driving seat.
“This softening of prices is the natural and welcome consequence of the 13% year-on-year increase in available properties. For the first time in years, buyers have a real choice, which is tempering the frantic price growth we saw previously and creating a more stable environment for everyone.
“This isn’t a market running out of steam; it’s a market firing on all cylinders. Demand is being actively fuelled by more accessible mortgage lending and the recent interest rate cut, which have unlocked a new wave of purchasing power. Mortgage approvals have risen for the first time in four months, which again points to a desire to move.
“What we are witnessing is the perfect recipe for a strong and stable market: confident, empowered buyers are being met with a greater supply of homes. This shift from a supply-starved, frantic market to a balanced, active one is fantastic news for anyone looking to make a move in the second half of the year.”
Jonathan Hopper, CEO of Garrington Property Finders:
“The post-Stamp Duty lull in demand has collided with a deluge of supply.
“In some areas, the flood of supply seems almost biblical. Estate agents are seeing a wave of new instructions that includes properties re-entering the market that were withdrawn from sale during last year’s uncertainty, as well as the traditional summer surge.
“This is not primarily a market correction prompted by falling demand, but one triggered by an inescapable imbalance: too many sellers, not enough serious buyers.
“On the ground, we are witnessing a clear behavioural shift. Many sellers are not financially distressed, but they are fatigued – tired of waiting for perfect conditions, and now motivated to act.
“However, they are doing so in a landscape where buyers remain cautious amid sticky interest rates and lingering political and economic questions.
“In this environment, token price reductions of £5,000 to £10,000 just won’t cut it. The properties that are selling are those where sellers have responded with decisive, meaningful price adjustments, and their reductions are now showing up in the national data.
“June’s 0.8% fall in average prices is not surprising, and the quarterly fall of 0.5% says it all about the direction of travel. As recently as March, prices were rising by 1.1% on a quarterly basis.
“If this trajectory continues, as we expect it will, the summer months may bring a series of increasingly visible price softening moments, driven not by panic, but by pragmatism.
“Sellers are being forced to adapt to a new normal, and the market data is beginning to reflect this sharp recalibration.”
