UK house prices rise slightly as interest rate expectations rise By Proactive Investors

Proactive investors – rose 0.3% in July compared to the previous month, the third month in a row and what was the biggest increase since late 2022.

Nationwide’s seasonally adjusted data was higher than the 0.1% gain economists had expected and follows a 0.2% increase in June.

The average house price in July was £266,334, up from £266,064 in June. However, prices are still around 2.8% below the record highs of summer 2022.

The figures are due to be released ahead of the Bank of England meeting later on Thursday. Robert Gardner, chief economist at Nationwide, said housing market activity had “remained relatively stable in recent months”.

Recent data from the BoE shows that around 60,000 mortgages for home purchases are approved each month.

“While this is still about 10% below levels before the pandemic hit, it is still a respectable pace given the higher interest rate environment,” Gardner said.

He noted that interest rates are expected to be cut slightly this year and in the coming years, which would help reduce borrowing costs.

“However, the impact is likely to be quite modest as the swap rates underlying fixed-rate mortgage prices already reflect expectations that interest rates will fall in the coming years,” he said.

Elliott Jordan-Doak of Pantheon Macroeconomics noted that mortgage rates fell in June for the first time since January, from 5.19% for the average rate on a 2-year fixed-rate mortgage with a 75% LTV ratio to 5.16%.

According to him, the total price increase since January now stands at 1.7%, while the Nationwide index shows prices have only fallen in two of the seven months so far this year.

His research into the underlying trends of the three main indices – Nationwide, Halifax and the official ONS measure – showed monthly, annualised house price inflation of 1.2% in June, “but today’s reading should boost that figure for July”.

“As official house prices tend to lag unofficial series such as the Nationwide index, there could be further gains when the ONS publishes house price data for June. In addition, some forward-looking indicators in June already suggested that house prices would rise further from here,” he said.

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