Slow and Steady: UK House Prices Show Small Gain
However, the impact of higher borrowing costs is still taking its toll on the property market.
The Market in Review
According to mortgage lender Nationwide, UK house prices are now 1.5% higher than in June last year. But despite this small gain, prices are still around 3% lower than their record high two years ago. Housing market activity has been sluggish, with the total number of transactions down by around 15% compared to 2019 levels.
Higher Borrowing Costs Weigh Heavy
Nationwide’s chief economist, Robert Gardner, notes that higher borrowing costs are the main culprit behind the slow market. “Earnings growth has been much stronger than house price growth in recent years, but this hasn’t been enough to offset the impact of higher mortgage rates,” he said. The interest rate on a five-year fixed rate mortgage has risen from 1.3% in late 2021 to around 4.7% today.
Regional Variations
The picture varies across different regions in the UK. Northern Ireland remains the best performer, with prices up 4.1% compared to Q2 2023. England as a whole saw a modest 0.6% increase year-on-year, while Wales and Scotland both saw a 1.4% rise. However, some regions like Southern England and East Anglia continue to struggle, with prices down 0.3% and 1.8% year-on-year respectively.
A Cautionary Tale
Gardner’s warning is clear: “Housing affordability is still stretched.” For first-time buyers, the monthly mortgage payment equivalent to take-home pay is already a significant burden, at around 37%. As borrowing costs remain high, it’s clear that the UK property market will need to adapt to these new realities if it hopes to recover from its current slump.
SOURCE: Ref Image from Reuters
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