House prices are on the rise again, according to Nationwide, Britain’s biggest building society. However, a clear North-South divide has emerged as high mortgage rates particularly impact the more expensive homes in the South.
Over the year to June, the typical house price increased by 1.5%, which translates to an average rise of £3,825. Despite this overall growth, homeowners in the South of England are more likely to have seen their property values fall due to the pressure of high mortgage rates.
As of June, the average UK home is valued at £266,064, reflecting a modest increase of 0.2%, or £1,815, from May. This slight month-on-month rise indicates a steady but slow recovery in the housing market.
Interestingly, London stands out as an exception to this North-South divide. In the capital, house prices have climbed by 1.6% over the past year. This increase suggests that the London housing market is somewhat resilient, possibly due to continued demand and the unique economic factors at play in the city.
In summary, while house prices are generally increasing across the UK, the impact of high mortgage rates is creating a disparity between the North and South, with the South facing more significant challenges.
In May, house prices saw an average increase of 0.4% month-on-month and 1.3% year-on-year. This indicates a steady, albeit modest, rise in property values over both the short and longer term.
However, despite this recent uptick, house prices are still approximately 3% below the all-time high recorded in the summer of 2022. This suggests that while there is some recovery, the market has not yet fully rebounded to its previous peak levels.
In England, the most significant price increases were observed in more affordable regions, particularly in the North and the Midlands. These areas experienced a combined growth of 2.4% year-on-year. This trend highlights a stronger demand and potentially greater affordability in these regions compared to the more expensive southern parts of the country.Â
Overall, while there are signs of growth and recovery in the housing market, prices have not yet returned to their previous highs, and the rate of increase varies significantly by region.
In contrast, more expensive areas in southern England experienced a 0.3% decline in house prices. This drop highlights the impact of high mortgage rates on pricier properties in the South.
London stood out as the best-performing region in southern England, with house prices growing by 1.6% annually. This suggests that the capital’s housing market remains robust despite broader regional trends.
On the other hand, East Anglia was the weakest-performing region, with house prices decreasing by 1.8% year on year. This significant drop underscores the varying dynamics within different parts of the southern housing market.
| Region | Average house price | Annual rise or fall |
| Northern Ireland | £190,300 | 4.1% |
| North West | £213,580 | 4.1% |
| Yorkshire and the Humber | £206,653 | 3.8% |
| North | £158,467 | 2.9% |
| London | £525,248 | 1.6% |
| West Midlands | £242,873 | 1.4% |
| Wales | £207,650 | 1.4% |
| Scotland | £181,186 | 1.4% |
| East Midlands | £231,745 | -0.2% |
| Outer Metropolitan (includes parts of Buckinghamshire, Hertfordshire and Surrey) | £418,919 | -0.5% |
| Outer South East(includes parts of Bedfordshire, Oxfordshire and East Sussex) | £331,995 | -1.1% |
| South West | £301,139 | -1.5% |
| East Anglia | £270,597 | -1.8% |
| Source: Nationwide | ||
Elevated mortgage rates are continuing to have a notable impact on the housing market, according to recent findings from Nationwide.
Overall, the total number of property transactions has declined by approximately 15% compared to the peak levels seen in 2019. Interestingly, transactions involving mortgages have experienced an even steeper drop, down by nearly a quarter during the same period.
UK Finance data reveals a significant shift in mortgage affordability as well. For instance, the average five-year fixed mortgage rate for buyers with a 20% deposit has risen sharply to 5.09%. This marks a substantial increase from the 2.24% rate recorded back in 2019. Such changes in mortgage rates are clearly influencing buyer behaviour and overall market activity, contributing to the current subdued conditions in the housing sector.
These developments underscore the ongoing challenges faced by prospective homeowners and investors alike amidst the evolving economic landscape and regulatory environment affecting mortgage affordability and market dynamics.
However, there is optimism that rates could decrease as the possibility of a Bank of England base rate cut looms closer.
In recent weeks, several major mortgage lenders have reduced their rates.
Robert Gardner, Nationwide’s chief economist, commented: “While earnings have outpaced house price growth in recent years, this hasn’t been sufficient to counter the impact of higher mortgage rates, which remain significantly above the record lows seen in 2021 following the pandemic. As a result, housing affordability remains strained. Currently, a borrower earning the average UK income purchasing a typical first-time buyer property with a 20% deposit would face a monthly mortgage payment equivalent to 37% of take-home pay—well above the long-term average of 30%.”
Higher mortgage rates and subdued demand have prompted analysts at Capital Economics to revise down their house price growth forecast for 2024, from 3% to 0.5%.
Andrew Wishart, senior UK economist, commented: “Looking ahead, we anticipate that the national average house price will decline in Q3 [July to September]. The average mortgage rate remains above 4.5%, which has acted as a deterrent to demand, while there also seems to be an increase in the number of homes being listed for sale.”
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