A strong labor market and limited housing stock supported annual UK house price growth in double digits in July, despite higher interest rates, higher inflation and lower affordability.
UK house prices rose at an annual rate of 11 per cent last month, up slightly from 10.7 per cent in June, according to mortgage provider Nationwide.
The increase brought the average home price to £271,209, £55,000 above the level in February 2020, before the Covid-19 pandemic.
“Demand continues to be supported by strong labor market conditions,” said Robert Gardner, chief economist at Nationwide. “At the same time, the limited inventory of homes in the market helped maintain upward pressure on home prices.”
However, the impact of inflation hitting a 40-year high of 9.4 percent and a record-low consumer confidence was highlighted by the cooling of Nationwide’s managed mortgage transactions.
Nationwide reported that total housing market transactions in the three months to May were about 20 percent below the high levels generated by the holiday stamp duty. However, they are still 5 percent above pre-pandemic levels.
Home transfer transactions with mortgages have slowed more than other sectors, while first-time buyer mortgage completions remain resilient.
This is despite house price growth continuing to outpace earnings by a wide margin, increasing the required deposit. Combined with higher interest rates, this has resulted in higher mortgage payments relative to income.
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