UK house prices rise at fastest pace since late 2022

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The UK recorded the fastest annual house price growth in August since late 2022, according to lender Nationwide, as cheaper mortgages continued to power a gradual recovery in the property market.

The mortgage lender’s house price index rose 2.4 per cent year on year in August.

But prices edged down 0.2 per cent compared with July, and came in lower than the 0.2 monthly increase forecast by economists.

Robert Gardner, Nationwide’s chief economist, said that if the UK economy keeps recovering steadily then “housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth”.

House prices remain about 3 per cent below the all-time high recorded in the summer of 2022 during the post-pandemic boom in the property market, which was encouraged by very low borrowing costs. The average house price stood at £265,375 in August, Nationwide said.

The sharp rise in the Bank of England’s base rate to a 16-year high since 2022 pushed up mortgage rates and made it harder for people to afford homes.

The central bank announced its first rate cut at the start of August, with mortgage already falling ahead of the decision in line with market expectations.

“The UK housing market is in a better place than it was last summer as inflation comes under control and lenders trim their rates,” said Tom Bill, head of UK residential research at Knight Frank.

Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said that despite the blip in the monthly data, the overall trend in house prices was positive with values rising in five out of eight months this year, gaining 1.6 per cent since December. “We think today’s fall was noise,” he said.

Economists expect borrowing costs and house prices to improve slowly into next year.

“There is scope for mortgage rates to fall further and house price growth to accelerate early next year,” said Ashley Webb, UK economist at consultancy Capital Economics.

The figures for August come from a typically quiet period in the property market when relatively fewer homes change hands. The annual growth figure was boosted partly by weak data a year earlier.

Leading indicators suggest the housing market is picking up steam. Property website Zoopla this week said the number of homes listed for sale was at a seven-year high, up 14 per cent from this time last year, as homeowners prepare for the autumn selling season.