UK house prices rise in June despite high mortgage rates

The average house price in the UK continued to rise in June despite high mortgage rates, with the annual growth rate rising from 1.3% in May to 1.5%, according to Nationwide.

Average house prices reached £266,604 in June 2024, up from £264,249 the previous month.

The market is returning to historic highs, although prices are still around 3% below the peak recorded in the summer of 2022.

High borrowing costs mean that cash is king in today’s market. Cash transactions were about 5% above pre-pandemic levels.

The total number of transactions decreased by about 15% compared to 2019 levels. Transactions involving mortgages fell by almost 25%, Nationwide said.

And inflation is still in the Bank of England’s sights, despite a key reading pointing to the Threadneedle Street target rate of 2% in early June. Interest rates were held at 5.25%, the highest level in 16 years, with hints of a summer rate cut continuing to creep into the bank’s narrative. Part of the equation has been analyzing wage growth that fuels price increases elsewhere in the economy.

“While earnings growth has been much stronger than house price growth in recent years, this has not been enough to offset the impact of higher mortgage rates, which are still well above the historic lows prevailing in 2021, in following the pandemic,” said Robert Gardner, chief economist at Nationwide.

“For example, the interest rate on a five-year fixed rate mortgage for a borrower with a 25% deposit was 1.3% at the end of 2021, but in recent months it has been closer to 4.7% .”

As a result, housing affordability is still limited, Gardner noted. “Today, a borrower earning the UK average income and purchasing a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay – well above the long-term average 30%.”

Meanwhile, the election has been cited as a distraction as market watchers hold their breath over housing policy.

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See more information: UK house prices stagnate amid high mortgages

“The announcement of the general election has definitely triggered a drop in demand, at least in the first half of June,” said Emma Jones, managing director of mortgage broker When The Bank Says No.

“It’s likely that people were watching the debates rather than browsing Rightmove (RMV.L). But when several lenders started cutting rates at the end of June, the market regained its mojo and demand rose sharply.”

At a regional level, Northern Ireland recorded the biggest growth in house prices in June, with real estate rising 4.1% compared to the same period the previous year. East Anglia was the weakest performing region, with prices falling 1.8% over the year.

See: How much money do I need to buy a house?

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