Surprise over momentum in the market

THE housing market retained a surprising degree of momentum in July, despite the mounting pressures on household budgets, according to an index.

Annual UK house price growth accelerated slightly in July to 11.0%, from 10.7% in June, according to Nationwide Building Society, which added that it expects the market to slow in the months ahead.

Prices were up by 0.1% month on month, marking the 12th monthly increase on this measure in a row.

The average house price in July was £271,209.

Robert Gardner, Nationwide’s chief economist, said: “The housing market has retained a surprising degree of momentum given the mounting pressures on household budgets from high inflation, which has already driven consumer confidence to all-time lows.

“While there are tentative signs of a slowdown in activity, with a dip in the number of mortgage approvals for house purchases in June, this has yet to feed through to price growth.

“Demand continues to be supported by strong labour market conditions, where the unemployment rate remains near 50-year lows and with the number of job vacancies close to record highs.

“At the same time, the limited stock of homes on the market has helped keep upward pressure on house prices.

“We continue to expect the market to slow as pressure on household budgets intensifies in the coming quarters, with inflation set to reach double digits towards the end of the year.

“Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”

Mr Gardner said transactions among home-movers with a mortgage have slowed more than other sectors.

This probably reflects the recent stamp duty holiday, which ended last year, encouraging homemovers to bring forward purchases at that time, he said.

He continued: “First-time buyer mortgage completions have remained resilient, and are now (around) 5% above pre-pandemic levels, despite growing affordability pressures.

“Indeed, house price growth has continued to outpace earnings by a wide margin, increasing the deposit hurdle, and, together with higher interest rates, has pushed up mortgage repayments relative to incomes.”