House prices crept up ‘modestly’ in July rising by 0.6% compared to June, the latest data from Nationwide has revealed.
Over the last year the typical house price in the UK has grown by 2.4% – a little higher than the 2.1% increase in the 12 months to June.
It means the average house price in the UK according to Nationwide is £272,664. Yet, Nationwide said affordability is improving with the UK house price to earnings ratio the lowest it has been in over a decade.
Robert Gardner, chief economist at Nationwide, said: “While the price of a typical UK home is around 5.75 times average income, this ratio is well below the all-time high of 6.9 recorded in 2022 and is currently the lowest this ratio has been for over a decade.
“This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan-to-value mortgages.
“Similarly, the interest rate on a typical five-year fixed-rate mortgage is around 4.3% (for a borrower with a 25% deposit). This is still over three times the all-time lows prevailing in autumn 2021, but well below the highs of c5.7% reached in late 2023.”
Gardner said providing the broader economic recovery was maintained, housing market activity was likely to continue to strengthen gradually in the next quarters.
The data comes as more support for first-time buyers has landed in the shape of some innovative new mortgages. The last few months have seen the arrival of 100% mortgages and improved mortgage terms.
But experts fear there are still many challenges facing potential buyers and existing homeowners.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Affordability remains a challenge for some, however. Inflation has been creeping up in recent months, putting a dent in consumer purchasing power.
“Higher stamp duty costs can also be prohibitive, particularly for first-time buyers who must save a large deposit and cover a heavier property tax liability.
“While some buyers are clearly pressing ahead with their purchase plans, as reflected in robust mortgage approval data for June, others may now be mulling their options more carefully as higher costs pose a fresh challenge.”
She added: “For many borrowers, today’s home loan rates will be far more attractive than during the peak of the post-pandemic mortgage crisis when average two- and five-year fixes soared past the 6% mark.
“Not everyone can secure a better deal though despite more favourable borrowing conditions. Borrowers emerging from cheap fixed-rate deals taken out before the Bank of England began hiking interest rates in December 2021 are facing an inevitable jump in their monthly repayment costs unless they have managed to pay down the balance.”
