House price growth hits 19-month high but affordability pressures remain

House price growth hit its highest level for almost two years during July, Nationwide data shows.

The latest Nationwide House Price Index puts average growth at 2.1%.

The figure is up from 1.5% in June and the highest level since December 2022.

Average prices were up 0.3% on a monthly basis to £266,334.

Robert Gardner, chief economist for Nationwide, remains cautious though, highlighting that prices are still around 2.8% below the all-time highs recorded in the summer of 2022 and affordability remains stretched while mortgages rates are high.

He said: “For an average earner buying a typical first-time buyer property, the monthly mortgage payment is equivalent to around 37% of take-home pay, well above the 28% prevailing pre-Covid and the long-run average of circa 30%.

“Investors expect interest rates to be lowered modestly in the years ahead, which, if correct, will help to bring down borrowing costs. However, the impact is likely to be fairly modest as the swap rates which underpin fixed-rate mortgage pricing already embody expectations that interest rates will decline in the years ahead.”

Commenting on the data, Guy Gittins, chief executive of Foxtons, said: “Property market momentum has been building steadily so far this year and, despite macro headwinds and the surprise of a snap election, we’re yet to see this momentum show any signs of slowing.

“Bank of England data released earlier this week shows that monthly mortgage approvals are now sitting at consistently high levels as pent-up demand across the market has been released and this is helping to cultivate higher rates of house price growth across the UK market.

“At Foxtons, we’ve also noted a significant increase in both buyer enquiries and seller instructions since the start of the year and this is now bearing fruit with respect to the level of sales completing.”

Nicky Stevenson, managing director of Fine & Country, added: "July’s house price rise could mark a turning point for the property market and if interest rates drop today, optimists will be expecting a property boom in the latter half of 2024.

"This marks the fastest pace of growth since December 2022 and suggests renewed confidence in the housing sector and hopefully the start of a more stable period.

"With the combination of rising house prices, stabilised inflation, and potentially lower interest rates, this could lead to a flurry of activity in the coming months - with more properties coming to market and a potential boost in transactions.

"But while these factors may fuel increased activity, the full effects will take time to unfold. Increased housing supply and ongoing affordability pressures will act as a counterbalance, and help to ensure that any market growth remains sustainable in the long term."