UK house prices edged up 0.2% in June to an average of £299,330, reversing a 0.2% decline in May, as mortgage rates began to ease following a surge triggered by the Iran war, according to the Lloyds house price index. The annual rate of price growth also ticked higher to 0.6%, with first-time buyer prices rising 0.8%, signaling a recovery in demand.
Mortgage Rates Ease Amid Geopolitical Tensions
Fears over inflation and expectations of higher interest rates stemming from the Middle East conflict had knocked confidence in the property market in recent months. However, lenders have started trimming mortgage rates over the past few weeks. Swindon-headquartered building society Nationwide cut its home loan rates on two separate occasions last month, as US-Iran peace talks helped to ease inflationary concerns.
Lloyds noted that softening borrowing costs are helping to nudge house prices back up, with June marking the first monthly price increase in four months, as reported by City AM. Amanda Bryden, head of mortgages at Lloyds, said: "While affordability remains stretched for many buyers, mortgage rates have eased from their recent highs, offering some encouragement to those considering a move."
Southern England Lags Behind
Property markets across southern England remained subdued compared with other parts of the country. Average prices dropped by 2% to £381,654 in the South East and by 1.3% to £299,532 in the South West. In contrast, England's northern regions lifted the national average increase, with prices rising by 2.8% to £181,133 in the North East and by 2.4% to £248,218 in the North West.
Although mortgage approval rates fell in May, Lloyds attributed this to the earlier spike in borrowing costs, adding that activity should recover as mortgage rates continue to decline. "Looking ahead, we expect the housing market to continue moving at a measured pace. Lower borrowing costs should provide some support for demand, though affordability constraints remain an important factor," Bryden added.
Political Leadership and Regional Divide
Nathan Emerson, chief executive of estate agent trade body Propertymark, said: "Across the summer, attention will also likely turn to new political leadership and what a change in prime minister could mean for the property sector. Housing remains central to economic growth and must be a priority across all nations within the UK."
Last week, housing analysts voiced concerns that Prime Minister-to-be Andy Burnham's devolution agenda could further widen the existing divide between property markets in the North and South of England. While house prices across the south have stalled, values in the north are gradually climbing, and industry figures suggested this trend could be amplified under Burnham's leadership.
