UK house prices rise at fastest pace since late 2022

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The UK recorded its fastest annual house price growth since late 2022 in August, with the property market gradually recovering thanks to affordable mortgages, according to lender Nationwide.

The Mortgage Investors Service's home price index rose 2.4% in August from a year earlier, but was down 0.2% from July and below the 0.2% monthly increase economists had forecast.

Separate figures released by the Bank of England show robust demand in the housing market, with mortgage approvals rising to their highest level since former chancellor Liz Truss's small budget.

Robert Gardner, chief economist at Nationwide, said that if the UK economy continues to recover steadily, housing market activity is likely to strengthen gradually, as a combination of slightly lower interest rates and yields outpacing house price growth eases constraints on affordability.

Home prices remain about 3% below their all-time highs, which were reached during the post-pandemic housing boom in the summer of 2022, and this was aided by very low borrowing costs. The average home price was $265,375 in August, according to Nationwide.

Since 2022, the BoE's benchmark interest rate has surged to its highest level in 16 years, sending mortgage rates soaring and making it harder for people to buy a home.

The central bank first announced a rate cut in early August, and mortgage rates had already fallen ahead of the decision, as markets expected.

Tom Beale, head of UK housing research at Knight Frank, said the UK's housing market was in better shape than last summer as inflation was under control and lenders cut interest rates.

Elliot Jordan-Dock, chief UK economist at Pantheon Macroeconomics, said despite the monthly data slump, the overall trend in house prices was positive, with values ​​rising in five of the eight months this year and up 1.6 per cent since December. He said he thought today’s decline was noise.

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Economists expect borrowing costs and home prices to improve slowly next year.

Ashley Webb, a British economist at consultancy Capital Economics, said there was room for mortgage rates to fall further and house price growth would accelerate early next year.

According to BoE figures, UK mortgage approvals were stronger than expected last month as lending volumes rose. Approvals rose to 62,000 in July, the highest level since September 2022 and up from 60,600 approvals recorded in June. Meanwhile, net mortgage lending rose by 2.8 billion in July, the highest level since 2022 and up from 2.6 billion in June.

The August home price figures come from a generally quiet period in the real estate market, with relatively few homes changing hands. The annual growth figures were boosted in part by weaker data from a year ago.

Leading indicators suggest the housing market is picking up. Property website Zoopla said this week that the number of homes on the market hit a seven-year high and was up 14 per cent on the same period last year, as homeowners prepare for the autumn selling season.

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