(July 1): UK house prices failed to grow for a second straight month in June, Nationwide Building Society said, as mortgage rates held above levels seen before the Iran war despite recently easing.
The average property price was flat at £277,484 after a 0.6% drop the previous month, data released by the lender on Wednesday showed. It was slightly worse than the 0.1% gain expected by economists.
The conflict rattled the mortgage market and ended a strong start to the year for house prices with borrowing costs pushed higher by expectations the Bank of England would need to hike interest rates to curb inflation. Prices climbed almost 2% in the first four months of the year before the effects of the Iran war hit the market.
Mortgage rates have cooled from the highs seen in April, however, and may fall further in the coming months as investor bets on BOE hikes retreat in anticipation that the truce between the US and Iran will hold. Markets are pricing in just one quarter-point increase by the end of the year while many economists believe the UK central bank can avoid tightening policy altogether as the inflation threat recedes.
“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,” said Robert Gardner, Nationwide’s chief economist. He said this was as long as “domestic political uncertainty does not adversely impact sentiment", a reference to the recent resignation of UK Prime Minister Keir Starmer and his likely replacement by Andy Burnham from the soft left of the Labour Party.
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Moneyfacts data on Tuesday showed the average two-year fixed mortgage rate has fallen to 5.53% from 5.90% at the peak. That is still 0.7 percentage points above levels seen before the war.
While Nationwide’s figures pointed to prices being up 2.2% year-on-year, they continued to show a North-South split in house price performance.
South East England was the worst-performing region in the second quarter, with prices barely growing from a year earlier. In London, they were up 1.6%, though it remains the most expensive part of the country with an average valuation of £540,903.
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Meanwhile, valuations climbed 3.9% in the North West. Northern Ireland continued to be the best-performing part of the UK with growth of 8.6%.
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