The latest Nationwide House Price Index reveals that annual house price growth softened in June, easing to 2.1% from 3.5% in May. This marks a continued slowdown in the pace of growth, suggesting that the housing market is cooling as higher borrowing costs and affordability pressures weigh on demand. While prices are still rising year-on-year, the deceleration reflects a more cautious sentiment among buyers and sellers alike.
Industry experts and professionals have shared their views on the latest announcement:
Rosie Hooper, chartered financial planner at Quilter Cheviot said:
“The latest data from Nationwide shows house prices fell by 0.8% in June, bringing annual growth down to 2.1%. This marks a considerable softening compared to last month’s figures, which saw 0.4% monthly growth and 3.5% on an annual basis, and highlights a housing market still adjusting to high borrowing costs and shifting buyer sentiment.
Affordability remains a huge hurdle for many buyers. While the effective interest rate on new mortgages edged down slightly to 4.47% in May, repayments are still considerably higher than just a few years ago. Many prospective buyers, particularly first-time purchasers, face tough affordability assessments and elevated upfront costs following the changes to stamp duty.
That said, recent data from the Bank of England shows signs of life returning to the mortgage market. Net borrowing of mortgage debt rose by £2.1bn in May, following a sharp drop in April, while gross lending jumped to £20.4bn, which is the highest level since January. Mortgage approvals for house purchases also rose for the first time this year, increasing to 63,000. Though still below historic norms, this suggests that buyer confidence is starting to return in dribs and drabs.
While the market is still digesting the stamp duty reforms in April, they will soon become the norm, and their immediate impact will fade into the rear-view mirror. First-time buyers and movers alike are already beginning to adjust to the new thresholds, which should help stabilise activity over the coming months.
Geopolitical risks also linger in the background. Tensions in the Middle East appear to have calmed for now, but any renewed escalation could push up inflation and reignite pressure on interest rates, potentially affecting mortgage pricing later this year.
We are not far away from the summer holidays starting which can be a quieter period for the housing market, as many households prioritise holidays over house hunting. With schools off and professionals away, activity often slows across the board, from viewings to mortgage processing, leading to a natural lull in transactions. This may already be weighing on house prices, and we could see further downward pressure in the coming months. However, a seasonal dip is nothing new. Prices could fall slightly more over the period, but we may not see any major price movements until the market begins to warm up again in early autumn, when buyers and sellers return with renewed focus.”
Nathan Emerson, CEO at Propertymark, comments:
“Despite the fact we have witnessed much economic turmoil in the first half of the year, it is highly encouraging to see stability within the housing market as house price growth softened in June. We still sit in a phase of inflation not quite being where the Bank of England ideally want it to be and we still have elevated base rates. Nonetheless, it remains encouraging that consumers are still approaching the buying and selling process with a firm degree of confidence.”
Matt Thompson, head of sales at estate agency Chestertons, says:
“Property buyers were hoping for another interest rate cut this month but higher-than-expected inflation diminished those odds. On a national level, some house hunters are opting to pause their search or change their search criteria to find a home within their budget. In London, however, buyer demand stays relatively strong with a particular uplift in domestic buyers across central London where property prices have recently seen a price adjustment.”
Across the year to date, we have seen the average number of properties per member branch hold absolutely steady, and this year’s number represent a figure that is almost 20 per cent higher that the same period twelve months earlier.”
Jonathan Handford, Managing Director at national estate agent group Fine & Country, comments:
The stamp duty changes, which saw demand being pulled forward in the rush to beat the revised threshold, are a possible contributor to this softening in the market last month. After months of frantic activity in the lead up to April, the market has arguably been slightly out of breath since.
On a positive note, Bank of England figures released yesterday showed mortgage approvals rose for the first time since December last year, which suggests demand is getting back on track and that a degree of normality is starting to return.
Though the economy, jobs market and under-pressure households desperately need an interest rate cut, the Bank of England remains laser-focused on inflation and where that goes next will be key. A cut in August could stimulate the market but Threadneedle Street may well err on the side of caution if inflation remains sticky.
Affordability remains a key challenge, especially for first-time buyers. Rising prices, higher deposits and tougher lending conditions continue to keep many people on the sidelines. Lenders are definitely trying to support borrowers in new ways but for many first-time buyers, the first step onto the ladder is still too high.
That prices in the north of England are up 3.1% compared to 2.2% in the south may suggest there is less scope for price growth in Southern England.
There are a multiplicity of headwinds, economic and geopolitical, that have the potential to impact the housing market at present and it’s hard to predict with any certainty where the market is headed next. All we do know is that the demand for property in this country is always resilient, whatever conditions we find ourselves in.”
