UK house prices unexpectedly rise in June

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UK house prices unexpectedly rose in June, according to data from lender Nationwide, suggesting the property market is stabilising ahead of a Bank of England interest rate cut.

New data released on Monday showed that home prices rose 0.2% in May and June, following a 0.4% rise the previous month and contractions in March and April.

The increase brought the average home price to 266,064, 1.5% higher than the same month last year and 1.3% higher than the previous month.

Both figures beat analysts' expectations. Economists polled by Reuters had expected a monthly contraction of 0.1% and an annual increase of 1.1%.

“The market appears to be stabilizing as rates are expected to move lower in the coming years,” said Michelle Stevens, a mortgage expert at personal finance comparison site Finder.com.

Over the past few weeks, several major banks have cut their mortgage rates, which should help boost confidence in the housing market.

Britain's inflation rate fell to the Bank of England's 2% target in May, strengthening market expectations that the central bank could cut interest rates from a 16-year high of 5.25% early next month.

Home prices peaked at $274,000 in the summer of 2022 and fell the following month as rising borrowing costs hit potential buyers. Mortgage rates eased from their summer peak and recovered in the second half of 2023, but there was some volatility in 2024, with mortgage rates rising slightly as service inflation picked up.

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The number of mortgage approvals in the UK fell for a second month in a row in May, according to data released by the BoE on Monday, reflecting the impact of higher borrowing costs on the property market.

Net mortgage approvals for home purchases fell to 60,000 in May from 60,800 in April and 61,086 in March. Remortgage loan approvals fell slightly to 29,600 in May from 29,900 in April.

The figure was slightly higher than the 59,900 expected by economists polled by Reuters, but well below the 65,340 reported in May 2019.

There were significant regional differences in house prices across the country, with Northern Ireland and the North West of England both recording strong annual growth, up 4.1 per cent, while the South West and East Anglia both saw falls of 1.5 per cent and 1.8 per cent respectively.

The average cost in London, the most expensive city for a home, rose 1.6 per cent year-on-year to $525,248.

Tom Beale, head of UK housing research at Knight Frank, said the seasonal spring rebound in the UK housing market had slowed slightly this year, as demand was suppressed by high mortgage rates and uncertainty surrounding the UK general election.

But he added that the new government and the first rate cut since March 2020 should provide more impetus after the summer.

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