House price growth clings to double digits at 10.7%

House price growth clings to double digits at 10.7%
Darren Staples/Bloomberg

House price growth slowed in June but not enough to bring it down to single digits, as experts argue macroeconomic headwinds are still yet to deter buyers completely.

Annual growth dropped to 10.7 per cent in June, down from 11.2 per cent in May, according to Nationwide’s latest house price index.

Most regions saw a slight slowing in annual growth over the second quarter of this year, with London remaining the weakest performing region for growth. Meanwhile, South West overtook Wales as the strongest performing region.

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The average UK property price now sits at a record high of £271,613. Over the past year, this figure has increased by more than £26,000.

While figures from the Office for National Statistics had suggested house growth was starting to revert back to single digits in March, in April growth jumped back up to 12.4 per cent.

Nationwide's chief economist, Robert Gardner, said there are tentative signs of a slowdown with the number of mortgage approvals falling back towards pre-pandemic levels and surveyors reporting some softening in new buyer enquiries. 

“The market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year,” he explained.

“Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”

The Bank of England has raised the base rate five times, with it now sitting at 1.25 per cent, having sat at 0.1 per cent in December.

Impact of rates

While some reckon the rising rate environment has significantly changed the market, making it much more expensive, others think this is yet to put off buyers.

Chief executive of mortgage broker SPF Private Clients, Mark Harris, said all borrowers are now facing a very different rate environment.

“Gone are the sub-1 per cent deals available nine months ago. Now, mortgage products are in the 3 to 4 per cent range depending on their length and loan-to-value,” said Harris.

"These rates available today reflect not only the increase in cost of funds but also lenders' desire to moderate volumes, with many of the high street banks still sitting on large balances or even cheap Bank of England funds.”

Despite mass predictions of a continued slowdown, director at property consultant Inhous Angus Dixon reckons the outlook “remains relatively bullish”.

“The fundamentals of the wider UK economy and the London market still ring true, even though there are macroeconomic headwinds which may halt buyers slightly, rather than completely put them off,” said Dixon.

“There are people who have to move, whether that’s to upsize of downsize, and they are undeterred.

“For the majority buying in prime or super-prime London, a few rate hikes will not impact them too much, proving to be more of a speed bump than a roadblock.”