In a recent report by Nationwide, it was revealed that UK house prices remained stagnant in June compared to May. However, when compared to the previous year, prices have dropped by 3.5%. This decline aligns with the 3.4% decrease seen in May, defying market expectations of a more severe 4.0% fall.
On a month-to-month basis, house prices showed relative stability. After experiencing a 0.1% decline in May from April, prices rebounded in June, rising 0.1% from May on a seasonally adjusted basis. The average house price in June, without seasonal adjustments, stood at £262,239, showing a slight increase from £260,736 the previous month.
Nationwide’s chief economist, Robert Gardner, shed light on the factors influencing the housing market. He noted that longer-term interest rates, which impact mortgage pricing, have surged in recent months due to signs of persistent inflation in the UK economy. This has led investors to anticipate further increases in the Bank of England’s policy rate, and the expectation for it to remain elevated for an extended period.
Gardner further highlighted that borrowing costs have climbed back to levels last seen after the disappointing UK government budget in the autumn. Surprisingly, these rising costs have not yet had a substantial negative effect on sentiment. Mortgage applications have remained steady, and indicators of consumer confidence have shown improvement, albeit still below long-term averages.
Nonetheless, Gardner cautioned that the sharp rise in borrowing costs will likely have a significant impact on UK housing market activity in the near future. The prospect of higher mortgage rates is expected to act as a drag on the market. It remains to be seen how this will unfold in the coming months.