UK house prices rebounded in July following a dip in June, according to data from building society Nationwide. Annual house price growth rose from 2.1 per cent to 2.4 per cent, while the average house price increased from £271,619 in June to £272,664 last month.
The house price to earnings ratio fell to its lowest level in over a decade, with the price of a typical UK home now around 5.75 times average income. This is down from the all-time high of 6.9 recorded in 2022, helping to ease deposit constraints for potential buyers.
Robert Gardner, Nationwide's Chief Economist, noted that activity in the housing market appears to be holding up well despite the end of the stamp duty holiday. He highlighted that 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average.
Gardner attributed the improvement in affordability to a strong period of income growth, more subdued house price growth, and a modest decrease in mortgage rates. The interest rate on a typical five-year fixed-rate mortgage is currently around 4.3 per cent for a borrower with a 25 per cent deposit, below the high of 5.7 per cent reached in late 2023.
Looking ahead, Gardner expressed optimism, stating that with low unemployment, healthy earnings growth, and strong household balance sheets, housing market activity is likely to continue strengthening gradually if the broader economic recovery is maintained.
