Nationwide has delivered a £540 blow to homeowners as UK house prices edged lower in June, despite annual growth picking up. The building society reported that the average UK house price fell to £277,484 in June, down from £278,024 in May, a drop of £540. However, year-on-year growth accelerated to 2.2% from 1.7% in May.
Market Softening Amid Geopolitical Uncertainty
Robert Gardner, Nationwide's Chief Economist, attributed the softening market to geopolitical tensions and rising energy prices. "It is not surprising that the market has softened a little in recent months, given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates," he said. He noted that consumer confidence and housing sentiment have weakened, and mortgage approvals fell noticeably in May.
Gardner also highlighted a potential positive development: the signing of a memorandum of understanding between Iran and the US has helped push oil prices back towards pre-conflict levels. "If the energy shock continues to subside, the Bank of England may not need to raise interest rates, or at least by less than had previously been anticipated – a view reinforced by the fact that UK inflation has also been lower than expected in recent months," he added.
Fixed-Rate Mortgage Outlook Improves
Gardner pointed to a shift in market expectations for the future path of the Bank Rate, which has helped bring down the market interest rates that underpin fixed-rate mortgage pricing. "If maintained, these trends will help to restore household confidence and ease affordability constraints, paving the way for a recovery in housing market activity in the coming quarters, providing that domestic political uncertainty does not adversely impact sentiment," he said.
Mixed Regional Performance
Rupert Collingwood, Founder at The London Broker, cautioned that national figures mask significant variation. "While it's positive to see some growth, the devil is in the detail, as house price values will vary from street to street, house to house," he said. He suggested growth is concentrated in more affordable market segments, while mid and upper segments are losing ground. "The anaemic growth in the South East is likely a real-time fall taking into account inflation, which would align with what we are seeing on the ground," Collingwood added.
Stamp Duty Reform Called For
Riz Malik, Independent Financial Adviser at R3 Wealth, argued that lower oil prices alone won't revive the market. "Even with oil prices falling, we are still a long way from where mortgage pricing was before the war. Even with the outlook for base rate hikes subsiding, that will not be enough to get the market moving," he said. Malik called for stamp duty reform as the key to stimulating activity, especially with Andy Burnham's potential rise to No 10.
