House prices experienced their fastest pace of growth since December 2022, rising by 2.1% over the year in July, the latest data from Nationwide has revealed.
The mortgage lender’s house price index showed in the month of July house prices edged up by 0.3% – a little higher than June’s 0.2%. Annual price growth was 1.5% in June.
The increase came in a month when mortgage lenders have been cutting prices and following a change a government.
But, whilst the rate of growth is higher than it has been in well over two years, prices are still relatively ‘stable’ according to Nationwide’s chief economist, Robert Gardner.
He said prices were 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,” he said.
“While this is still c.10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment.”
Gardner said for homeowners, affordability was ‘stretched’. He explained a borrower with a 25% deposit would expect to be paying 1.9% more on their mortgage at the moment than in 2019. What’s more an ‘average earner’ buying a typical first-time buyer property would pay 37% of the typical take-home pay to cover their monthly mortgage repayments. This is well above the 28% paid pre-Covid and the long-run average of around 30%.”
Gardner thought the Bank of England was likely lower interest rates ‘modestly’ in the years ahead and this will improve affordability – albeit gradually.
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Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager, said the housing market was showing signs of a resurgence with data from Zoopla also revealing a 16% increase in sales agreed in July compared a year earlier.
“This follows a strong run in the first half of the year,” she said, “and agents now find themselves with the highest number of homes on their books in six years – a sign that sellers are returning to the market in droves in the hope of securing a good deal.
“While the ramp up in activity is having some impact on price levels, higher levels of stock can also keep a lid on prices. An interest rate reduction from the Bank of England today could add serious momentum to the market if buyers and sellers who have been waiting patiently in the wings for borrowing conditions to improve are now spurred into action.”
