London House Prices Rise

LONDON (Reuters) – British house prices rose by the most in six months in July, according to figures published by mortgage lender Halifax, indicating renewed momentum in the property market.

House prices increased by an annual 2.3%, marking the biggest yearly increase since January. The last time prices rose more annually was in February 2023, with a 2.5% increase.

On a monthly basis, prices jumped by 0.8% in July compared to June, surpassing economists’ expectations of 0.3%.

The Labour Party, following a landslide win in last month’s parliamentary election, has vowed to reform Britain’s planning system and set mandatory targets to accelerate home-building. However, the ongoing shortage of supply is likely to keep driving house prices up in the medium term.

Additionally, the Bank of England reduced rates to 5% from a 16-year high of 5.25%, marking its first cut since March 2020.

Amanda Bryden, Halifax’s head of mortgages, stated, “Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.” However, she cautioned that affordability issues and a lack of available properties continue to challenge prospective homeowners.

Other indicators of the housing market also show increasing momentum. Nationwide reported a 2.1% rise in house prices for the 12 months ending in July, the most substantial annual increase since December 2022.

Mortgage rates surged after Prime Minister Liz Truss’s economic plan caused a bond market slump in September 2022. While borrowing costs have stabilized, they remain nearly double pre-turmoil levels amidst rising benchmark interest rates.

Investors currently estimate about a 33% chance of the BoE lowering the Bank Rate by another quarter point at its next meeting in September.