UK house prices rise in June despite high mortgage rates, says Nationwide
THE average UK house price rose by 0.2% month on month in June despite mortgage rates remaining high.
The modest monthly growth leaves the average price of a house in the UK at £266,064, the index by Nationwide Building Society showed.
Prices rose at a slower rate than in May, when they increased by 0.4% month on month.
Robert Gardner, Nationwide’s chief economist, said: “While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates, which are still well above the record lows prevailing in 2021 in the wake of the pandemic.
“For example, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021, but in recent months this has been nearer to 4.7%.
“As a result, housing affordability is still stretched.”
Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay.
This is well above the long-run average of 30%.
The total number of transactions is down by about 15% compared with 2019, when prices were at a record high, Nationwide said.
Mortgage rates have remained stubbornly high after The Bank of England held the base interest rate at 5.25% for longer than expected.
Earlier this year, economists had expected the Bank to cut rates as soon as May or June.
But policymakers voted to hold them amid signs that some inflation indicators had still not fallen as fast as anticipated.
Alice Haine, personal finance analyst at Bestinvest, said: “The Bank of England may have chosen to hold interest rates at a 16-year high of 5.25% at its rate-setting Monetary Policy Meeting in June, but there were heavy hints that a summer rate cut may still be on the cards offering hope to first-time buyers and existing homeowners that borrowing costs may ease at a more rapid rate.
“While inflation has hit the BoE’s target of 2%, thanks largely to falling food and energy prices, interest rates are yet to budge and, worryingly, the fallout from persistently high borrowing costs has still not been fully realised.”
Lenders including NatWest and Barclays have slashed rates by up to 0.31% with HSBC quickly announcing that they would be following suit.
Nationwide’s index also included data for the UK’s nations and regions, showing annual changes during the three months to June.
The figures showed that, within England, house prices rose fastest in the North and the Midlands, which saw combined growth of 2.4% year on year.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
Meanwhile, Southern England saw a 0.3% fall.
London was the best-performing southern region, with annual price growth maintained at 1.6%.
East Anglia was the weakest-performing region, with prices down 1.8% year on year.
Experts have described it as “a mixed picture”.
Estate agent Jeremy Leaf, former residential chairman of the Royal Institute of Chartered Surveyors, said: “Early spring optimism all but disappeared when it became apparent that any reduction in mortgage rates would be delayed.
“This reliable indicator of housing market health also shows how the election announcement had little impact on prices or activity and underlines how cash purchases are playing a more important role.
“Now that inflation has started to fall, expectations are growing that the drop in base rate may not be delayed too long after all.”
Amy Reynolds, head of sales at estate agency Antony Roberts, said the situation is “very concerning for first-time buyers”.
“House prices may have come off a little from their post-pandemic highs but this is more of a correction than a fall and home-ownership is still out of reach for many, with high borrowing costs not helping the situation.
“One trend we are seeing is people looking to financially downsize to release capital to live on and pay bills, which is hugely concerning.”
But there is hope that the property market will pick up after the election and that an interest rate cut may be on the cards in August.
How to save for your first home
HAVE you ever wondered how first-time buyers manage to go from savers to homeowners?
Getting a foot on the property ladder might seem like a daunting task, but The Sun’s My First Home feature allows you to find out exactly what it takes to finally get the keys to your own place.
Leanne Gem managed to buy her £456,000 four-bed house with an “underrated scheme”.
Karis Jacobs and her husband George used the 50/50 method to buy their first home just two years after losing their jobs.
Parents Chae and Cem used a “DIY Help to Buy scheme” to buy their £466,000 first home.
Anupam and his wife Shrabanti lost £6,000 free cash when buying their first home – here’s how you can avoid it.
Who tracks house prices?
There are several different house price trackers, all of which measure something slightly different.
The official measure comes from the Office for National Statistics, which examines the prices homes have actually sold for after they are registered on the Land Register.
This is the most accurate of all the indices, but the figures come out three months after the homes are sold, so there’s a big time lag.
Rightmove, Halifax, and Zoopla all publish a monthly index tracking the average prices of homes on which they provide mortgages.
While they do adjust their figures to iron out big outliers, both lenders measure average house prices based on the properties they see.
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