House prices in the UK rose by 1.5% year-on-year in June, coming to an average of £266,064, according to a report.
According to Nationwide’s House Price Index, the monthly house price change was pegged at 0.2%, which is down from 0.4% in May.
The report found that house prices were around 3% below the all-time high recorded in the summer of 2022.
From a regional perspective, Northern Ireland was the best performing area, with house prices up 4.1% compared to Q2 2023.
In England, house prices were up by 0.6% compared to the prior quarter, with Wales and Scotland coming to a 1.4% year-on-year rise.
Northern England’s growth was pegged at 2.4% year-on-year, which compares to 0.3% in Southern England.
London’s growth was pegged at 1.6%, the strongest in the Southern region, while East Anglia was the weakest performing region overall at 1.8%.
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.”
He added: “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%.”
House prices have ‘remained relatively stable’
Karen Noye, mortgage expert at Quilter, said that house prices have “remained relatively stable”, which “reflects a housing market that, despite the lack of significant growth, remains resilient amid broader economic trends”.
She continued: “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.”
Noye also pointed to Labour’s Freedom to Buy scheme, which would make the mortgage guarantee scheme permanent, saying that it would be “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 [LTV] ratios increase the risk of negative equity, leaving new homeowners vulnerable if house prices fall,” she noted.
Noye said that on the Conservative side, the party pledged to bring back Help to Buy, introduce a Starter Homes Scheme, keep the first-time buyer stamp duty threshold and scrap capital gains tax (CGT) for landlords.
“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,” she added.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that with inflation hitting the Bank of England’s 2% target, a rate cut was very close – perhaps even next month.
He said: “After years of rising rates, followed by months of holds, that first reduction when it comes will send an important message to borrowers, enabling them to plan their moves with more confidence. In many ways, it will influence homebuyer decision-making far more than the outcome of the election, which many feel is a foregone conclusion.
“That said, borrowers will still have to get used to paying more for their mortgages, with the days of rock-bottom rates long gone.”
