House prices in the UK increased by 1.5% year-on-year in June, with the average house price now standing at £266,064, Nationwide has found.

In its monthly house price index, Nationwide revealed that house prices also increased by 0.2% between May and June, with the building society describing this growth as "broadly stable".

Chief economist at Nationwide, Robert Gardner, said: "Housing market activity has been broadly flat over the last year, with the total number of transactions down by around 15% compared with 2019 levels. Transactions involving a mortgage are down even more (nearly 25%), reflecting the impact of higher borrowing costs. By contrast, the volume of cash transactions is actually around 5% above pre-pandemic levels.

"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 - well above the long run average of 30%."

In terms of nations, Northern Ireland was the best performer, recording an annual change of 4.1% in the second quarter year-on-year, with house prices now standing at £190,300.

Scotland (£181,186) and Wales (£207,650) saw respective rises of 1.4% annually in the same period, while house prices in England increased by 0.6%, with the average English house price now standing at £302,102.

Across the same period, the North West (£213,580) was the best performing region, with house prices increasing by 4.1%, while Yorkshire and the Humber (£206,653) and the North (£158,467) also recorded jumps of3.8% and 2.9% respectively.

However, East Anglia was the worst performing region, with prices falling by 1.8%. The average house price in the region now stands at £270,597.

Personal finance analyst at Bestinvest, Alice Haine, said: "As more first-time buyers choose to take on mortgages with longer terms than the traditional 25 years, such as 30 years or more, in a bid to reduce monthly repayments, it highlights how entrenched affordability challenges have become as house prices remain alarmingly high relative to incomes.

"Borrowers will be tracking the Bank of England’s next rate decision at the start of August closely in the hopes that a rate reduction can ease their mortgage woes. While some major lenders have been slashing mortgage rates more recently in anticipation of a rate cut soon, borrowers are unlikely to feel reassured until the central bank makes a move.

"Until then, borrowers should consider carefully whether to opt for a tracker product or fix their mortgage for two or five years. This is where a trusted independent mortgage broker can be worth their weight in gold as they can help borrowers find the right solution for their individual circumstances in uncertain times."

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