Annual house price growth at highest for almost two years

Nationwide says UK house prices fell by 0.2% month on month in August, after taking account of seasonal effects, but the annual rate of house price growth continued to edge higher.

Average prices were up 2.4% year on year, a slight pickup from the 2.1% recorded in July and the fastest pace since December 2022 (2.8%). However, prices are still around 3% below the all-time highs recorded in the summer of 2022.

“While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging” explains Nationwide chief economist Robert Gardner.

“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “With agents reporting activity levels up as much as 20 per cent on the same period last year, the housing market is on a firmer footing and buyer and seller confidence is noticeably stronger. If that isn’t filtering through into higher prices month-on-month that is likely to be down to affordability constraints caused by higher mortgage pricing.

"There is pent-up demand created by buyers waiting for the much-anticipated first rate reduction. With lenders subsequently reducing their mortgage rates, launching sub-4 per cent five-year fixes, the days of rock-bottom mortgages may be long gone but more palatable pricing is helping sentiment.

"Now that the Bank of England has reduced rates, it sends out a strong message that they have not only peaked but are on a downwards trajectory after months of uncertainty. It enables people to make decisions with confidence and we anticipate a strong autumn market although the Budget looms ominously.”

But former Royal Institution of Chartered Surveyors residential faculty chief Jeremy Leaf - now a north London agent - cautions: “On the ground, activity remains stronger than it was a few months ago, particularly due to increased political certainty. Despite falls in base rate and inflation, confidence is a little fragile and won’t be helped by the Prime Minister’s recent announcement for us to expect a painful Budget at the end of October.

“Nationwide’s figures are of course only based on their own customers’ buying activity but have proved a reliable indicator of market activity for many years. Their figures on energy efficiency are interesting but we haven’t seen this reflected yet in buying activity and are unlikely to do so unless energy prices rise considerably higher."