UK house prices surge at fastest pace since December 2022
UK house prices rose at the fastest pace since December 2022 and are set to climb even higher if the Bank of England cuts interest rates again before the end of the year, as widely expected by markets.
The annual growth rate picked up to 2.4%, from 2.1% in July, Nationwide said.
However, on a monthly basis its figures showed a 0.2% dip in prices, which it said was a result of “seasonal factors”. That meant the average price of a UK home was £265,375, some £950 lower than the previous month.
Values were still around 3% lower than the record highs recorded in the summer of 2022, at the end of the pandemic property boom.
Robert Gardner, Nationwide's chief economist, said the housing market remained subdued but was coping with the increase in interest rates.
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“While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging),” he said.
The Bank of England cut interest rates on 1 August to 5% from a 16-year high of 5.25% for the first time since March 2020 and traders are expecting up to two more cuts before the end of the year.
If interest rates do come down as expected by investors, this could mean bigger house price jumps next year.
Ashley Webb, UK economist at Capital Economics, said: “The further drop in interest swap rates over the past month suggests there is scope for mortgage rates to fall further and house price growth to accelerate early next year.
“Our view that Bank Rate will decline from 5% now to 3% by the end of next year suggests that mortgage rates will fall from 4.8% now to below 4% in 2025.
“That could result in house prices growing by an above-consensus 5% year-on-year in Q4 2025.”
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However, buyer demand in the property market could take a hit if chancellor Rachel Reeves launches an anticipated tax raid in the October budget, agents warn.
"Despite falls in base rate and inflation, confidence is a little fragile and won’t be helped by the prime minister’s recent announcement for us to expect a painful budget at the end of October," said Jeremy Leaf, north London estate agent and a former RICS residential chairman said.
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “With agents reporting activity levels up as much as 20% on the same period last year, the housing market is on a firmer footing and buyer and seller confidence is noticeably stronger.
“If that isn’t filtering through into higher prices month-on-month that is likely to be down to affordability constraints caused by higher mortgage pricing.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager said: “The UK’s residential property market appears to be in recovery mode following the turbulence of 2023 when high borrowing costs and low supply stifled activity and dampened prices.
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“With more sub-4% mortgage rates now available and the prospect of more interest rate cuts this year, buyers are flooding back into the market as improving affordability levels raise the likelihood that people can net their desired home.
“Meanwhile, sellers, who have been sitting on the sidelines waiting for better market conditions, now feel confident to list their homes, though those hoping for a good deal may find the glut of new properties for sale along with mortgage rates that are still relatively high could keep a lid on prices for now.”
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