Annual house price growth increased slightly in July but still remained in the narrow range seen over the past year, house price index figures released today (1 August) showed.
The Nationwide house price index found the annual house price growth in July increased to 2.5 per cent, up from 2 per cent in June - a slight increase but nothing to suggest major change in the market balance between supply and demand.
The average house price in July sat at £217,010, up from £215,444 in June and the highest figure this year.
Robert Gardner, chief economist at Nationwide, expects house prices to increase by around 1 per cent over the course of 2018 with subdued economic activity and ongoing pressure on household budgets continuing to exert a drag on house price growth and market activity.
Ahead of an increasingly likely rate increase at the Bank of England’s monetary policy committee meeting on 2 August, Mr Gardner said most economists expect the bank rate to be increased from 0.5 per cent to 0.75 per cent.
Mr Gardner said: "Providing the economy does not weaken further, the impact of a further small rise in interest rates on UK households is likely to be modest.
"This is partly because only a relatively small proportion of borrowers will be directly impacted by the change -most lending on personal loans and credit cards is fixed or tends to be unaffected by movements in the bank rate."
Jeremy Leaf, north London estate agent and former Royal Institution of Chartered Surveyors (Rics) residential chairman, said in the slow growth in prices seen over the past few months, supply and demand remain broadly in line with the shortage of stock, as well as low interest and jobless rates, preventing a larger fall.
He said: "This balance is likely to be disturbed by even a modest increase in mortgage rates, even though relatively few borrowers will be affected by the change as they are on fixed-rate mortgages.
"But the direction of travel always seems to have an adverse impact on confidence and is likely to reduce low levels of transactions even further."
Lucy Pendleton, founder director of independent estate agents James Pendleton, said the housing market is beating inflation but only by a hair’s breadth.
However, Ms Pendleton said the price growth will only be the second most watched number of the week, with a likely rate rise only hours away.
She said: "Finally something might happen which will, at least temporarily, move the conversation away from Brexit, which for ordinary homeowners who are fascinated by their house price has only ever been a fuzzy political puzzle whose association with predictions of economic armageddon have been difficult to reconcile.
"Rate rises at this level are more psychological than any other, but even if the guidance says rates will remain low, the experts have been wrong before and buyers are prone to being overly cautious."
rachel.addison@ft.com
