The latest UK House Price Index show that average property values rose in May, offering further evidence that the housing market remains in a state of fragile stability.
On an annual basis, prices are now up 3.9%, rising from 3.6% in April, with the average UK house price reaching £269,000.
This marks a modest acceleration in annual growth, though it follows a period of volatility when house price inflation slowed as a result of Stamp Duty Land Tax (SDLT) changes introduced in April.
While this data is largely positive, the latest inflation surprise has cast fresh uncertainty over the mortgage market, says Holly Tomlinson, (Financial Planner at Quilter). The Consumer Price Index rose to 3.6% in June, up from 3.4% the previous month, and shows little sign of returning to the 2% target soon.
“While lenders had been trimming rates in anticipation of further base rate cuts, the higher-than-expected CPI figure may delay that trajectory,” said Tomlinson.
For buyers, this means affordability remains a key constraint, particularly for those relying on fixed-rate deals to manage stretched budgets.
The housing market remains finely balanced, with sentiment now hinging on the Bank of England’s next move in August, said Tomlinson.
“The announcement yesterday that Nationwide would widen access to its ‘Helping Hand’ mortgage is a step in the right direction, but it highlights just how limited current support for first-time buyers really is.
“The Chancellor’s Leeds Reforms may ease some lending restrictions, but without tackling the root causes of unaffordability, the impact will be modest at best.”
An underwhelming track record
While the government’s push to make the mortgage guarantee scheme permanent under the ‘Freedom to Buy’ banner sounds bold, its track record has been underwhelming.
Without meaningful changes to housing supply, these reforms risk simply being a drop in the ocean, said Tomlinson.
“The government will also need to examine its own risk appetite because, as a result of expanding high loan-to-value mortgages under the Leeds Reforms, it exposes people to a greater chance of default and possibly then repossession. In a volatile market, small deposits and large loans increase the chance of negative equity, which is hardly a stable foundation for first-time buyers,” she said.
“Ultimately, the most effective way to support first-time buyers is by building more homes. The Chancellor’s reforms must be matched with a serious commitment to increasing housing supply if they’re to make a lasting difference.”
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