UK house price growth moderated in July, with the 0.1 per cent monthly increase being the slowest pace since April 2013, according to Nationwide Building Society’s monthly index.
Annual house price growth remained in double digits, but slowed to 10.6 per cent from 11.8 per cent in June.
Robert Gardner, Nationwide’s chief economist, explained that the slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months.
He said: “The mortgage approvals declined by almost 20 per cent between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries.
“At least part of the slowdown in activity relates to the introduction of Mortgage Market Review measures. The modest rebound in mortgage approvals in June adds weight to the notion that the slowdown will prove temporary, though the underlying pace of demand remains unclear.
Mr Gardner said that with the labour market strengthening, mortgage rates are expected to remain low and as consumer confidence rises, activity is likely to recover in the months ahead.
“Over the longer term, the trajectory of house prices will remain crucially dependant on supply side developments.
“While there have been some encouraging signs that construction activity is picking up, the pace of home building continues to run far below most estimates of what would be required to keep up with household formation in the years ahead.”
Hugo Thistlethwayte, managing director of buying agency Prime Purchase, added that the slowdown does not apply “to certain markets”, citing booming markets in Cambridge and Oxford.
He said: “In areas such as West London, the housing market may be more muted than it has been but we are still seeing price rises on top of price rises.
“The market is as near equilibrium now as it can be. A gently rising housing market is a very positive place.
“London doesn’t fit into the UK anymore, nor those towns outside the city that you can commute from. There isn’t a bubble but some areas are hot for a good reason - genuine supply and demand.”
Mr Thistlethwayte added there is a “check on the market in the form of the new mortgage rules, with the stress testing that will now go on to ensure borrowers can afford them even when rates rise”.
He said: “The new mortgage rules will hamper those who need to borrow money and practically make them second-class citizens as far as vendors are concerned. If you need a mortgage you will be constrained by what you can pay and the length of time it will take.’
Yesterday (30 July), the Council of Mortgage Lenders revised its market forecasts, stating that while gross lending looks set to rise above £200bn for the first time since 2008, growth will continue at “a more sedate pace” in 2015, as momentum in the housing market diminishes under growing affordability pressures.
