UK house prices recorded a modest monthly increase in July, reversing the dip seen the previous month. According to Nationwide Building Society, the average property value went up by 0.6% from June to July, following a 0.9% fall in June. This improvement suggests a tentative recovery in market momentum.
Over the past year, house prices have also edged higher. The annual growth rate rose slightly from 2.1% in June to 2.4% in July. While not a dramatic jump, this change reflects a gradual strengthening of the housing market as it adjusts to shifting economic conditions and higher borrowing costs.
With this growth, the average price of a typical UK home now stands at £272,664. This figure indicates a return to steady gains, although property values remain significantly influenced by changes in interest rates, inflation, and buyer sentiment.
Robert Gardner, chief economist at Nationwide, commented that despite recent volatility—particularly in the wake of the stamp duty holiday ending—housing market activity has remained resilient. He said that underlying demand appears stable, even in a higher-rate environment.
Gardner noted that the number of mortgage approvals for house purchases was strong in June, with around 64,200 transactions recorded. This level is broadly in line with pre-Covid averages, which suggests that buyers have adjusted to the new landscape of higher interest rates and tighter affordability checks.
Affordability across the market, which worsened significantly during the pandemic due to rapid house price inflation, is now slowly improving. This is largely the result of continued wage growth combined with slower increases in house prices and a modest fall in mortgage rates.
Currently, the ratio of house prices to average earnings stands at approximately 5.75 times annual income. While still high, this is a notable improvement compared to the all-time high of 6.9 times income in 2022. It’s also the lowest this ratio has been for more than a decade.
This improvement in affordability is also being supported by an increase in the availability of mortgages with higher loan-to-value ratios. For buyers with smaller deposits, particularly first-time buyers, this has helped ease some of the barriers to homeownership.
Mortgage rates themselves have also become slightly more favourable in recent months. A standard five-year fixed mortgage, for example, is now priced at around 4.3% for borrowers with a 25% deposit. While still well above the record lows seen in late 2021, this is a significant drop from the 5.7% peak of late 2023.
Gardner added that the overall economic backdrop remains supportive for home buyers. Unemployment continues to be low, household finances are in relatively strong shape, and wages are rising faster than inflation. If interest rates continue to fall, these trends could further benefit the housing market.
He also suggested that if the Bank of England proceeds with its anticipated base rate cuts in the months ahead, this will likely lead to further improvements in affordability and borrowing conditions. This could bring renewed confidence to potential buyers and support a continued recovery in activity.
Some estate agents are already reporting signs of renewed optimism. At Chestertons, for instance, several branches have seen more sellers putting their homes on the market, which has in turn encouraged more buyers to re-enter the property hunt and start making offers.
Other industry voices have echoed these sentiments. Nathan Emerson, CEO of Propertymark, highlighted that many people are opting for longer mortgage terms—35 years or even 40 years—to manage their monthly payments amid ongoing cost-of-living concerns. He said a reduction in interest rates would be a welcome relief for these borrowers.
Mortgage brokers such as Mark Harris, CEO of SPF Private Clients, pointed out that falling mortgage rates are already having a positive effect. As rates continue to drop and lending criteria are relaxed, more buyers are expected to feel confident enough to proceed with larger loan sizes and competitive offers.
Meanwhile, data from HMRC revealed that residential property transactions increased by 13% between May and June, with 93,530 homes changing hands in June alone. Combined with rising mortgage approvals and improving sentiment, this suggests the UK property market is on course for a stronger second half of the year.
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