UK house prices rise at 10% annual rate despite higher mortgage costs


UK house prices rose by double digits for the 10th consecutive month in August as a lack of supply supported valuations despite rising mortgage rates and an intensified cost crisis of life.

House prices rose at an annual rate of 10% last month, down from 11% the previous month, but marking an uninterrupted double-digit expansion since October, according to mortgage provider Nationwide.

The annual growth rate was much faster than the 8.9% forecast by economists polled by Reuters.

Nationwide chief economist Robert Gardner said the slowdown so far had been “moderate” and, combined with a shortage of inventory in the market, meant price growth had “remained firm”.

Prices rose 0.8% between July and August, defying expectations that they would come close to stagnation due to soaring inflation, which is hitting household finances and consumer confidence.

Instead, the latest rise took the average house price to a new high of £273,751, up £50,000 from two years ago.

Andrew Wishart, property economist at consultancy Capital Economics, said the figures suggested property prices “managed to maintain positive momentum despite mounting pressure on household finances”.

Tomer Aboody, director of property lender MT Finance, said that “with less stock in the market. . . buyers have little choice and therefore outbid to secure housing”.

This is backed up by separate data from the Royal Institution of Chartered Surveyors, which showed the average stock of properties per estate agent branch fell to 35 in July, the lowest level since records began in 1978.

But with mortgage rates rising rapidly and the cost of living crisis worsening, many expect the housing market to cool in the coming months.

Tom Bill, head of UK residential research at estate agent Knight Frank, said the housing market was “playing a slow game of catch-up with the economy”, adding: “As supply continues to grow this fall and mortgage rates rise, demand will slow and annual price growth will fall.

Data released by the Bank of England this week showed interest on newly contracted mortgages rose 18 basis points, or 2.33%, from June to July, the highest level in six years.

He also revealed that mortgage approvals had fallen below pre-pandemic levels and well below the peak during the pandemic-induced boom, when historically low interest rates and stronger demand spurred transactions and prices.

“We expect the market to slow further as pressure on household budgets intensifies over the coming quarters,” Nationwide’s Gardner said.

Column chart of annual % change showing that Oxford Economics expects UK house prices to contract from mid-2023

Consulting firm Oxford Economics expects UK house prices to start to contract from the middle of 2023 after a sharp slowdown this year.

Gabriella Dickens, from consultancy Pantheon Macroeconomics, said the rise in mortgage rates had been “too severe at a time when real incomes are falling”, adding: “We find it difficult to see a scenario in which mortgage prices real estate doesn’t fall squarely in the second half of the year. »


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