British House Prices Rise in July

By David Milliken

LONDON (Reuters) – British house prices were 2.1% higher than a year earlier in July, representing the biggest annual increase since December 2022. Nevertheless, they remain below the peaks reached earlier this year, according to figures from Nationwide Building Society published on Thursday.

Prices increased by 0.3% in July alone, bringing the average price to 266,334 pounds ($341,706). Both the monthly and annual increases exceeded economists’ forecasts in a Reuters poll.

This data arrives just ahead of the Bank of England’s announcement regarding the August interest rate decision. Many economists anticipate a cut from the 16-year high maintained for nearly a year.

Nationwide Chief Economist Robert Gardner noted, “Investors expect Bank Rate to be lowered modestly… which, if correct, will help to bring down borrowing costs.”

However, Gardner cautioned that the impact might be modest since swap rates already reflect expectations of declining interest rates over the coming years.

According to Nationwide, British house prices in July were 2.8% below the peak reached in the summer of 2022. Prices had surged 25% from the start of the COVID-19 pandemic until September 2022, when a bond market slump under then-Prime Minister Liz Truss temporarily limited mortgage financing.

Since then, prices have largely plateaued due to sustained high Bank of England rates aimed at addressing rising consumer price inflation following the pandemic and Russia’s invasion of Ukraine.

Nationwide reported that the typical monthly mortgage payment has now reached 37% of take-home pay, significantly above the 28% level prior to the pandemic and the long-run average of about 30%.

Gardner suggested that affordability may improve gradually through a combination of wage growth outpacing house price growth—which is expected to remain relatively flat—along with modestly lower borrowing costs.

($1 = 0.7794 pounds)