Why UK house prices have stopped moving
Key Points
- UK house prices rose 0.1% in July, with annual growth slowing to 1.8% from 2.2%.
- The average UK property now costs £277,542.
- Nationwide cites geopolitical tension, higher energy prices and volatile Bank Rate expectations.
- Consumer price inflation fell further in June and wage growth continued to ease.
- Quilter says prices will only shift once affordability improves.
UK house prices rose 0.1% in July as annual growth slowed to 1.8% from 2.2% in June, taking the average property to £277,542.
Nationwide’s July house price index put the average price at £277,484 a month earlier. After seasonal adjustment, prices stayed broadly flat.
Robert Gardner, Chief Economist at Nationwide, said market activity and prices have remained soft for several months, partly reflecting an uncertain economic backdrop.
Geopolitical tension has added to that, with conflict between Iran and the US pushing energy prices and market interest rates higher in recent weeks. Expectations for the future path of Bank Rate have swung as views shift on what those events mean for inflation.
Gardner said consumer price inflation declined further in June and wage growth has continued to ease, giving the Monetary Policy Committee more room to judge how much tighter policy is still needed.
“For now, the housing market remains in a holding pattern,” said Ian Futcher, Financial Planner at Wealth Manager Quilter.
Futcher said any meaningful shift in prices depends on how inflation, interest rates and consumer confidence develop over the coming months, and on whether mortgage affordability starts to improve.
he latest Bank of England money and credit statistics showed net mortgage approvals rose slightly to 58,200 in June but remained below the average of the previous six month period.
“Affordability continues to be a significant challenge, particularly as mortgage rates have drifted higher in recent weeks amid renewed tensions in the Middle East, which is keeping many prospective buyers sat waiting on the sidelines,” Futcher said.
He added that the Bank of England monetary policy committee’s decision to hold rates this week will provide some reassurance to borrowers.
“There had been growing concern that the renewed pressure on oil prices could complicate the inflation outlook and prompt a more hawkish response from policymakers.
“However, while a hold offers a degree of stability, we’re unlikely to see a meaningful reduction in mortgage costs for a while yet. Given concerns around inflationary pressures and the uncertain economic backdrop, lenders will remain cautious in their pricing.”
