London (Parliament Politics Magazine) – UK house costs have grown at the most rapid rate in 18 months but high mortgage rates suggest many prospective buyers still encounter affordability challenges, Nationwide has stated.
What Is Driving the Recent Surge in UK House Prices?
The building society stated the average house cost in the UK was £266,334 across July, up 0.3% on the earlier month. This resulted in an expansion in the annual rate of house price increase from 1.5% in June to 2.1% in July, the most rapid rate since December 2022. The earlier high came after Liz Truss’s notorious mini-budget during her brief tenure as prime minister, which led to a sharp growth in borrowing rates for buyers.
What Impact Have Recent Rate Cuts Had on the Housing Market?
Robert Gardner, Nationwide’s chief economist, stated housing market activity had remained stable in recent months, with about 60,000 mortgage approvals a month. He stated: “While this is still about 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest-rate environment.”
This week lenders such as Halifax, Natwest and Santander slashed interest rates by up to 0.20 percentage points. Last week Nationwide, the UK’s biggest lender, started offering a sub-4% deal for some new buyers. However, rates are still extremely higher than in the period before and just after the pandemic, when homebuyers relished much lower borrowing costs.
How Are Market Conditions Affecting Buyer and Seller Confidence?
Gardner stated: “For borrowers with a 25% deposit, the rate on a five-year fixed-rate deal has been about 4.6% in recent months, more than double the 1.9% average registered in 2019. As a result, affordability is still tried for many prospective buyers.” He contended that this was expected to enhance gradually as wage growth outpaced house expense growth and a modest drop in future borrowing costs.
Guy Gittins, the chief executive officer of Foxtons estate agency, stated: “Property market momentum has been building steadily so far this year and, despite macro headwinds and the surprise of a snap election, we’re yet to see this momentum show any signs of slowing …
“Buyers and sellers … are adopting a ‘life must go on’ attitude and pressing on with their plans to transact.”
Marc von Grundherr, the director of the estate agent Benham and Reeves, stated the fast rate of house price evolution demonstrated how much market conditions had enhanced so far this year, as well as high buyer confidence.