House prices rose 0.5% annually in May, according to the Lloyds House Price Index (formally Halifax House Price Index), but how did the market perform in June?
Fresh house price data has just been released revealing that they rose for the first time in four months during June, increasing by 0.2%, compared to May. The typical property now costs £299,330, while the annual rate of growth also edged higher to +0.6%.
Amanda Bryden, head of mortgages, Lloyds, said: “Recent price trends continue to reflect wider economic uncertainty, including the impact of global events on inflation and interest rate expectations. While affordability remains stretched for many buyers, mortgage rates have eased from their recent highs, offering some encouragement to those considering a move.
“While latest industry data shows the number of new mortgage approvals dropped in May, this wasn’t unexpected given the spike in rates seen earlier this year, and we’d expect to see activity recover assuming borrowing costs continue to fall.”
For first-time buyers, annual price growth increased to +0.8% in June from +0.3% in May, with the average first-time buyer property now costing £240,433, suggesting demand remains resilient.
Bryden added: “Looking ahead, we expect the housing market to continue moving at a measured pace. Lower borrowing costs should provide some support for demand, though affordability constraints remain an important factor. The outlook for house prices will depend largely on inflation continuing to ease and household confidence gradually improving.”
Industry reaction:
“The encouraging news is that brokers are already seeing the first signs of a correction coming through on fixed rates – not a return to the sub-4% deals of six weeks ago, but a genuine easing from where we’ve been.
“If this continues, we’d expect to see it feed through into more confident buyer activity over the coming months, rather than the cautious, wait-and-see approach that’s kept price growth so muted.
“We’re also seeing more interest in tracker mortgages, priced off base rate rather than a fixed margin, as buyers hedge against uncertainty while keeping the option to switch to a fixed deal without penalty once pricing settles further. In short: these figures reflect the peak of the rate squeeze, not the start of a new slowdown, and there’s a reasonable case for a gentler market from here, as well as a reason for cautious optimism.”
Iain McKenzie, CEO of The Guild of Property Professionals: “The return to monthly house price growth is an encouraging sign that the market continues to demonstrate resilience despite a challenging economic backdrop. Buyers remain cautious, but we’re seeing confidence gradually improve as inflation remains relatively contained and expectations for interest rates have become more stable.
“A steady Bank Rate has given lenders greater confidence to compete, and we’ve already seen mortgage pricing begin to edge down, which will improve affordability and borrowing power for many households.
“While buyers are taking more time to make decisions and remain highly price sensitive, the fundamentals of the market remain sound. Life events such as growing families, relationship changes and relocations continue to drive transactions regardless of wider economic uncertainty.
“At the same time, the increased supply of homes means buyers have more choice than they’ve enjoyed for some time. That creates a more competitive environment for sellers, making realistic, evidence-based pricing essential. Homes that are priced correctly continue to attract strong interest, while those chasing yesterday’s values are finding buyers less willing to stretch.”
James Nightingall of HomeFinder AI: “June was a reality check for a lot of sellers. Whilst demand is still there, most buyers are far more selective and price-sensitive than earlier in the year. House hunters are not disappearing; they are simply refusing to chase optimistic asking prices.”
Jeremy Leaf, north London estate agent: “Property prices have held up surprising well, bearing in mind continuing concerns about the impact of war on the cost of living and energy prices, as well as mortgage rates in particular.
“However, we are finding reluctance of some owners to recognise the new market realities of reduced confidence and difficulty of generating offers is holding back transactions.
“Now, political uncertainty is providing another excuse for buyers and sellers to sit on their hands. Speculation about tax undermines willingness to take on debt so the sooner Andy Burnham is confirmed as prime minister and we know where costs are likely to be changed the better.”
Gareth Lewis, deputy CEO of MT Finance: “From a lending perspective, we are seeing valuers cautious on price while buyers are looking for a steal and prepared to negotiate hard.
“After a strong start to the market this year, we are now seeing the ramifications of an interest rate environment which has become unstable again, and the impact this is having on transactions. Volatile funding rates are the real issue at the moment; while everything pointed towards a lower interest rate environment at the start of this year, the impact of war in the Middle East has since changed this outlook.
“The housing market urgently needs some government stimulus to encourage activity. Removing stamp duty would give a significant boost to the number of housing market transactions – after the deposit, stamp duty is the biggest outlay when buying a home. It isn’t just a big hit for those at the lower end of the market but impacts buyers at every level. If you are moving up the ladder and looking at what you can afford to buy, the whacking great stamp duty cost is inevitably going to limit how far you can stretch yourself.
“In terms of the land value tax that has been suggested as a replacement, an annual cost is something people would get used to over time whereas a one-off hit, like stamp duty, is much harder to budget for.”
Nathan Emerson, CEO of Propertymark: “When taking a broad view of the property market and the wider economy, it is encouraging to see average UK house prices deliver growth, both month on month and year on year.
“However, with Bank of England data showing mortgage borrowing has fallen for a second consecutive month, it will be important to keep close check on how this affects house prices over the summer.
“While consumer confidence remains relatively stable, the coming months will be key to monitor as the economy looks to hopefully strengthen.
“Across the summer, attention will also likely turn to new political leadership and what a change in prime minister could mean for the property sector. Housing remains central to economic growth and must be a priority across all nations within the UK.”
Mark Harris, chief executive of SPF Private Clients: “Lenders continue to slowly chip away at their mortgage rates, which is giving hope to borrowers and encouraging activity.“However, buyers are not getting carried away – the small uptick in average house prices indicates that buyers are negotiating hard and not willing to pay more than they need to.
“First-time buyers will be encouraged as house prices remain steady rather than soar. Lenders are working hard on offering solutions to those trying to get on the ladder for the first time, which is leading to a small improvement in their numbers.”
