House prices in the UK have remained stable in June compared to May 2023, although annual growth is yet to recover, with house prices falling by 3.5% in June 2023 compared to June 2022, the Nationwide House Price Index has found.

The report also found that in Q2 2023, all regions in the UK, other than Northern Ireland, recorded a drop in house prices, with East Anglia recording the most extreme reduction year-on-year, dropping 4.7% between Q2 2022 and Q2 2023.

The north of England saw an overall drop of 2.7% in houses prices in the period between Q2 2022 and Q2 2023, with the north west seeing an overall decline of 4.1%. Southern England also saw a drop in prices by 3.8%.

Nationwide’s chief economist, Robert Gardner, said: “Annual house price growth was broadly stable at -3.5% in June, little changed from the 3.4% decline recorded in May. Prices were also fairly stable over the month, rising by a modest 0.1%, after taking account of seasonal effects, reversing the 0.1% decline seen in May.

“Longer term interest rates, which underpin mortgage pricing, have increased sharply in recent months, in response to data indicating that underlying inflation in the UK economy is not moderating as fast as expected. This has prompted investors to expect the Bank of England (BoE) to increase its policy rate further and for it to remain higher for longer.

“Longer term borrowing costs have risen to levels similar to those prevailing in the wake of the mini-Budget last year, but this has yet to have the same negative impact on sentiment. For example, the number of mortgage applications has not yet declined and indicators of consumer confidence have continued to improve, though they remain below long run averages.”

Personal finance analyst at Bestinvest, Alice Haine, added: “With average mortgage rates hitting 6.37% for a two-year fix and 5.94% for a five-year fix, first-time buyers and homeowners looking to refinance soon have a challenging time ahead. Britain is now in the grip of one of the worst mortgage squeezes in history, and with no easy solutions on the table a good independent mortgage broker will be the must-have accessory of the summer.

“As the markets bet on more rate hikes this year, with interest rates potentially peaking at 6% - or even higher - as the BoE battles to extinguish the persistent inflation fire, the property market is in for a rough ride. Worsening interest rate expectations have led to big movements in the bond markets, and as bond yields rise so do swap rates, which lenders use to price home loans.

“For borrowers this means absorbing significantly higher mortgage rates at a time when their finances have already been battered by a cost-of-living crisis and rising taxes. Borrowers on variable rates are the hardest hit at the moment as they typically receive an instant rise in their mortgage repayments as interest rates increase. However, most UK mortgages are fixed with the 800,000 homeowners set to emerge from cheap fixed-rate deals in the second half of this year, and the1.6 million in 2024, all facing the same reality – a sharp rise in repayments.

“Looking ahead, house price falls are likely to accelerate as the gap between asking prices and what buyers can afford to offer widens. Sellers keen to move quickly must therefore price their homes at a realistic level if they want to secure a sale.”

Share Story: