UK house prices
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UK house annual price growth “slowed modestly” to 10.7% in June leaving the average price of a home at £271,613, according to Nationwide.

This figure represents a fall from 11.2% in the year to May, says the mutual’s June House Price Index, although prices grew by 0.3% this month, the 11 monthly increase in a row. Average house prices have lifted by over £26,000 in the past year.

Across the country, annual house prices saw softening growth in nine of the UK’s 13 regions in the three months to June.

The South West overtook Wales as the strongest performing region in the second quarter, with house prices up 14.7% year-on-year, a slight increase from the previous quarter. This was closely followed by East Anglia, where annual price growth remained at 14.2%.

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Wales saw a slowing in annual price growth to 13.4%, from 15.3% in the first quarter. Price growth in Northern Ireland was similar to last quarter at 11%. Meanwhile, Scotland saw a 9.5% year-on-year rise in house prices.

London remained the weakest performing UK region, with annual price growth slowing to 6%, from 7.4% in the previous quarter.

Since the onset of the pandemic, measured from the first quarter of 2020, London remained the weakest performing region, with average house prices in the capital lifting by 14.9%, while all other regions, except Outer Metropolitan London, have seen at least a 20% jump.

The South West was also the strongest performing region since the health crisis, with a 27.7% increase, followed by Wales, where average prices rose 26.2%, while in the North West, prices lifted by 25.8%.

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Nationwide chief economist Robert Gardner says: “UK annual house price growth slowed modestly to 10.7% in June, from 11.2% in May. There are tentative signs of a slowdown, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels in April and surveyors reporting some softening in new buyer enquiries.

“Nevertheless, the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low.

“Part of the resilience is likely to reflect the current strength of the labour market, where the number of job vacancies has exceeded the number of unemployed people in recent months. Furthermore, the unemployment rate remains close to 50-year lows. At the same time, the stock of homes on the market has remained low, which has helped to keep upward pressure on house prices.

Glenhawk chief executive Guy Harrington, adds: “Another month of slowing growth is just a precursor to the sharp correction about to torpedo the UK housing market, caused by a perfect storm of record inflation, geopolitical turmoil, rising rates and a once-in-a-generation cost of living crisis. It’s absolute madness to think house prices will keep on rising. As caution grips the market, the outlook for 2023 looks increasingly ominous.”

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Quilter mortgage expert Charlotte Nixon says: “We are continuing to witness the impacts of soaring inflation which now sits at 9.1% and is expected to run into double figures later this year, the rising cost of living, increasingly high energy bills and minimal support from the government – all of which are causing people to tighten their purse strings. What began as a ‘pinch’ on people’s finances has fast become a heavy burden on an increasing number of households.

“What’s more, the Bank of England recently hiked interest rates to 1.25% and is expected to increase them further still to tackle inflation, which will reduce people’s spending power and cause the already dwindling number of cheap mortgage rates to quickly disappear.

“With wages failing to keep up, the high costs of moving home will put off prospective buyers and first-time buyers will see their hopes of getting a foot on the property ladder pushed further out of reach.

Hargreaves Lansdown senior personal finance analyst Sarah Coles says: “Annual house price growth hit a high point in March, but has been dropping back ever since. This isn’t coming as a shock to anyone, because we were just waiting for the huge challenges facing buyers to feed into the figures.

“Rocketing house prices themselves have taken a toll. Since the onset of the pandemic, every area apart from London and its immediate surroundings, has seen prices rise by at least a fifth. In the South West, growth over this period has hit an eye-watering 27.7%, and in Wales, it’s 26.2%. There comes a time when prices simply rise out of reach for anyone hoping to buy a first property or move significantly up the ladder.

“At the same time, inflation is inflicting incredible pain on buyers. They don’t just face the problem that the rising price of everything from energy to food and fuel makes it difficult to stretch to a bigger mortgage, they also face the concern of mortgage lenders, who feed these figures into affordability calculations and conclude that they can’t afford the move. It doesn’t help that wages have fallen so far behind inflation. Lenders prefer to take into account your usual salary – without bonuses – and after inflation these have dropped 2.2% in a year.

“As the Bank of England raises rates to keep inflation under control, this also puts a dent in buyer enthusiasm. Mortgage rates are still low by historic standards, but they are rising every month, which raises the spectre of much higher payments further down the line.

“The question is whether we will see prices slow to a crawl, stagnate, or start to drop if we see a recession. An awful lot depends on things we don’t yet know – including how high interest rates will go, how deep any recession might be, the impact it could have on jobs, and whether this is serious enough to cause real damage to the property market.

“Certainly the risks on the downside are starting to build. We’re seeing the first predictions of price drops, and while these are currently a few voices in the crowd, they’re highly unlikely to be the last.”

By Roger Baird

Source: Mortgage Finance Gazette

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