Nationwide predicts 'drag' on transactions and prices for rest of year

The Nationwide is warning that a slowdown in household spending is likely in the near future, leading to a ‘drag’ on house buying and house prices - and this is despite an unexpected increase in values over the past month.

Robert Gardner, the Nationwide’s chief economist, says despite a surprising 1.1 per cent rise in prices recorded by the mortgage lender in June, there are key factors pointing more generally in the other direction.

“The number of mortgages approved for house purchase has slowed a little in recent months and surveyors report that new buyer enquiries have softened ... While survey data suggests that new buyer enquiries have softened, it also indicates that this has been matched by a decline in new instructions. Indeed, the number of properties on estate agents’ books remains close to all-time lows” he says.

The housing market depends on confidence and health in the wider economy, both made more uncertain during the course of Brexit negotiations.

“In our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets. This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead” Gardner warns.

He says by the end of 2017, the annual house price increase will be around two per cent.

The 1.1 per cent rise in June takes annual house price inflation at this point in the year to 3.1 per cent, and the average house price across the UK to £211,301.

Nationwide says there has been a shift in regional house price trends.

Price growth in the South of England has moderated, converging with the rates prevailing in the rest of the country. In the second quarter of this year the gap between the strongest performing region (East Anglia, which saw five per cent annual growth) and the weakest (the North, with one per cent growth) was the smallest on record, based on data going back to 1974.

London saw a particularly marked slowdown, with annual price growth moderating to just 1.2 per cent - the second slowest pace of the 13 UK regions and the weakest pace of growth in the capital since 2012.