By Emmanuel Nduka
United Kingdom has recorded the fastest annual house price rise in August since late 2022.
This is according to lender Nationwide, as cheaper mortgages continued to power a gradual recovery in the property market.
Nationwides’s house price index rose 2.4% year-on-year in August, but compared with July, prices edged down 0.2% and came in lower than the 0.2% monthly increase forecast by economists.
Figures from the Bank of England (BoE) added to signs of firm demand in the housing market, with the number of mortgage approvals rising to the highest level since former prime minister Liz Truss’s “mini” Budget.
The mortgage lender’s chief economist, Robert Gardner said if the UK economy kept recovering steadily then housing market activity was “likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth”.
House prices remain about 3% below the all-time high recorded in the summer of 2022 during the post-pandemic boom in the property market, which was encouraged by very low borrowing costs.
The average house price stood at £265,375 in August, Nationwide said.
The sharp rise in the BoE’s base rate to a 16-year high since 2022 pushed up mortgage rates and made it harder for people to afford homes.
The central bank announced its first rate cut at the start of August, with mortgage rates already falling ahead of the decision in line with market expectations.
“The UK housing market is in a better place than it was last summer as inflation comes under control and lenders trim their rates,” said Tom Bill, head of UK residential research at Knight Frank.
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said despite the blip in the monthly data, the overall trend in house prices was positive, with values rising in five out of eight months this year and gaining 1.6% since December. “We think today’s fall was noise,” he said.
Meanwhile, economic experts expect borrowing costs and house prices to improve slowly into next year.
“There is scope for mortgage rates to fall further and house price growth to accelerate early next year,” said Ashley Webb, UK economist at consultancy Capital Economics.
The BoE figures showed that UK mortgage approvals were higher than expected last month as lending volumes increased. Approvals increased to 62,000 in July, the highest figure since September 2022 and up from the 60,600 approvals recorded in June. Net mortgage lending, meanwhile, rose £2.8bn in July, also the highest level since 2022, compared with £2.6bn in June.
The house price figures for August come from a typically quiet period in the property market, when relatively fewer homes change hands. The annual growth figure was boosted partly by weak data a year earlier.
Also, leading indicators suggest the housing market is picking up steam.
Property website Zoopla earlier this week said the number of homes listed for sale was at a seven-year high, up 14% from this time last year, as homeowners prepare for the autumn selling season.
