9:45 AM, 1st July 2024, About 4 months ago
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The UK’s house prices showed modest growth in June as prices edged up by 0.2% in June compared to May, resulting in an annual increase of 1.5%, Nationwide reports.
Its latest house price index also reveals that prices are still 3% below the record high reached in the summer of 2022.
The building society’s chief economist, Robert Gardner, says that market activity is flat because of higher borrowing costs.
While earnings growth has outpaced house price increases, mortgage rates have risen significantly from their 2021 pandemic lows – hitting affordability.
Mr Gardner 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. “
The average first-time buyer is now facing a monthly mortgage payment equivalent to 37% of their take-home pay, Nationwide says.
Regionally, the picture is mixed as Northern Ireland continues to lead with the strongest performance, with prices up 4.1% year-on-year.
Northern England also outperformed the south, recording a 2.4% annual increase.
Conversely, southern England saw a slight decline of 0.3% year-on-year, with East Anglia experiencing the weakest performance at -1.8%.
London remained the best-performing southern region with prices holding steady at a 1.6% annual rise, the index reveals.
Guy Gittins, the chief executive of Foxtons, said: “The election may be looming, but this has done little to deter the uplift in market activity seen in recent months, with UK house prices continuing to show positive signs of upward growth.
“It’s clear that homeownership remains high on the agenda and so far this year we’ve seen a notable increase both in terms of buyer enquiry levels and the number of sales being agreed.”
He adds: “We expect that the market will remain resilient regardless of which political party comes out on top this Thursday and, with the addition of a base rate cut on the horizon, we anticipate a very busy end to the year for the UK housing market.”
Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “Buyers swapped packing cases for suitcases, as the summer slowdown hit the property market early this year.
“House prices were broadly flat, as the pressure of higher prices and mortgage rates persuaded some buyers that now was the time to get on with the rest of their lives and leave the property search for later in the year.”
She added: “Buyers are wrestling with higher mortgage rates, as, according to Moneyfacts, the average two-year fixed rate rose from 5.92% to 5.97% during June.
“The market has been slowly reassessing its predictions of when the Bank of England will cut interest rates, pushing it further and further through the year.
“We haven’t seen any sudden moves, but this relentless rise for the past few months has meant average rates have increased from 5.56% at the end of January, which has forced some buyers to reconsider.”
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