House prices across the UK rose by 0.6% in July, recovering from a 0.9% monthly fall in June, according to new figures from Nationwide Building Society. The bounce-back helped push the annual rate of house price growth to 2.4%, up from 2.1% the previous month.
The average UK house price now stands at £272,664, with the latest data suggesting the property market is showing resilience despite ongoing economic uncertainties. Mortgage approvals for house purchases reached 64,200 in June, broadly matching pre-pandemic levels despite higher interest rates.
Affordability shows steady improvement
Robert Gardner, Nationwide's chief economist, said housing affordability has been steadily improving after deteriorating markedly during the pandemic. "After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates," he explained.
The price of a typical UK home now stands at around 5.75 times average income, well below the all-time high of 6.9 recorded in 2022. This ratio is currently the lowest it has been for over a decade, helping to ease deposit constraints for potential buyers.
Mortgage rates remain elevated
Interest rates on typical five-year fixed-rate mortgages currently sit around 4.3% for borrowers with a 25% deposit. While this remains more than three times the all-time lows seen in autumn 2021, it represents a significant improvement from the highs of around 5.7% reached in late 2023.
Gardner said underlying conditions for potential home buyers remain supportive despite global economic uncertainties. "Unemployment remains low, earnings are still rising at a healthy pace, household balance sheets are strong and borrowing costs are likely to moderate a little further if the Bank of England base rate is lowered further in the coming quarters," he noted.
Market activity shows signs of recovery
Matt Thompson, head of sales at London-based estate agent Chestertons, reported an evident uplift in vendors wanting to sell, which has motivated more buyers to resume their search. "Last month alone, some of our branches have seen an evident uplift in the number of vendors wanting to sell which has motivated more buyers to resume their search and make an offer," he said.
HM Revenue and Customs reported earlier this week that house sales jumped by 13% month-on-month in June. Across the UK, an estimated 93,530 home sales took place during the month, which was 1% higher than in June 2024.
Lenders adapt with new solutions
Nathan Emerson, chief executive at property professionals' body Propertymark, highlighted how many people are extending mortgage terms to 35 or 40 years to manage affordability. "Many people are delaying paying off their mortgages until later in life via 35-year or 40-year mortgages. Therefore, a reduction in interest rates would be very welcome to help offset ongoing financial pressures," he said.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said lower mortgage rates and expectations of further reductions are giving the market impetus. "Lower mortgage rates, with the expectation of more reductions to come, are giving the market impetus and putting borrowers in a stronger position when it comes to negotiating their property purchase," he explained.
Bank of England decision awaited
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said buyers are pressing ahead with purchase plans despite higher costs posing fresh challenges. Lenders are offering solutions with more relaxed affordability rules and increased low-deposit or 100% mortgages to help first-time buyers onto the property ladder.
Karen Noye, a mortgage expert at wealth manager Quilter, said all eyes are on the Bank of England's next interest rate decision. "It was thought that a rate cut was fairly certain on Thursday, but recent inflation data coming in higher than expected may just temper things slightly and force buyers to wait," she said.
Properties return to market
Tom Bill, head of UK residential research at Knight Frank, warned that sticky inflation means a probable cut may only be followed by one more this year. "Despite a modest uptick in July, high levels of supply are keeping a lid on prices and means it is still very much a buyers' market," he said.
Jonathan Handford, managing director at estate agent group Fine & Country, noted that properties purchased during the Covid-era "race for space" are increasingly returning to the market. "Properties purchased during the Covid-era 'race for space' - particularly in coastal and rural areas - are increasingly returning to the market as commuting patterns normalise and lifestyle priorities shift," he said.
Future outlook remains positive
Iain McKenzie, chief executive of the Guild of Property Professionals, said realistic pricing is crucial for sellers to capture buyers' attention in a more competitive landscape. For buyers, the combination of more choice and likelihood of further mortgage rate improvements creates a compelling window of opportunity.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said a combination of pay rises ahead of inflation, falling mortgage rates and keenly-priced properties could start to reignite buyer enthusiasm in the coming months. Jason Tebb, president of OnTheMarket, emphasised that interest rate reductions are going to be more vital than ever when it comes to encouraging activity and momentum.
(PA/London) Note: This article has been edited with the help of Artificial Intelligence.
