Annual house price growth decelerated to 7.8% in June, according to the latest UK House Price Index from the Office for National Statistics (ONS).

The figure is down from 12.8% growth that was reported by the ONS for the year to May.

Despite house prices increasing between May and June 2022, the ONS stated that annual house price growth has slowed as a result of the rises in prices seen in June 2021, which were the result of stamp duty tax break changes.

The average UK house price stood at £286,000 in June 2022, a figure that is £20,000 higher than the same month last year.

The ONS data showed that average house prices have now increased over the year by 7.3% in England to £305,000, by 8.6% in Wales to £213,000, by 11.6% in Scotland to £192,000 and by 9.6% in Northern Ireland to £169,000.

“The market is already facing headwinds of high interest rates and inflation,” said CEO of The Mortgage Lender, Peter Beaumont. “This, coupled with a wage environment that is not keeping up despite the tight labour market, makes for a combination the market hasn’t seen in decades.

“As a result, one would have expected to see house price growth cool, but instead we are witnessing a swing in the other direction and signs of market persistence. Although demand has taken a knock from the cost of living crisis, we can largely explain this increase by the ongoing lack of housing supply.

“As we look ahead borrowers are being presented with challenges at various levels, and with many cutting their non-essential spending, it’s only a matter of time before we see people unable to meet their basic expenditure. This means we expect Autumn to be the true test for the property market. We’ll see then if limited supply will outweigh the pressures households are facing.”

Head of broker and propositions at Legal & General Mortgage Club, Clare Beardmore, added: “The threat that a recession poses to house prices certainly shouldn’t be overlooked, but the imbalance between housing supply and demand and the UK’s longstanding commitment to homeownership are among the factors counterbalancing this, or at least for the time being.

“Over half a million people aged between 50 and 65 have also left the workforce since the pandemic began, stimulating further property sales.
 
“Although house price inflation will likely dip in the coming months, this should not alarm anyone. The desire to press ahead in the face of economic headwinds is matched by lenders, advisers, and borrowers.”

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