More of the same from Nationwide

Continuing the recent trend, the lender reports a small drop in house prices in July but retains a modestly upbeat outlook for the months ahead.

Nationwide's figures for July

.

July 2023

June 2023

Monthly change

-0.2%

+0.1%

Annual change

-3.8%

-3.5%

Average price

£260,828

£262,329

Robert Gardner, chief economist, Nationwide - 

"Investors' views about the likely path of  UK interest rates have been volatile in recent months, with the projected Base Rate peak fluctuating between 5% in mid-May and 6.5% in early July. There has been a slight tempering in recent weeks but longer term interest rates, which underpin mortgage rates, remain elevated.

"The challenging affordability picture helps to explain why housing market activity has been subdued in recent months. There were 86.000 housing transactions in June, 15% below the levels prevailing the same time last year and 10% below pre-pandemic levels. More timely mortgage approval data showed a slight increase in activity in June, though most of these applications will predate the more recent rise in longer term interest rates. Moreover, activity is still c20% below 2019 levels".

Outlook

Robert Gardner goes on to say "Nevertheless, a relatively soft landing is still achievable, providing broader economic conditions continue to evolve along with our (and most other forecasters) expectations. In particular, unemployment is expected to remain low (below 5%) and the vast majority of existing borrowers should be able to weather the impact of higher borrowing costs, given the high proportion on fixed rates, and where affordability testing should ensure that those needing to refinance can afford the higher payments.

"While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices should help to improve mortgage affordability over time, especially if mortgage rates moderate once Bank Rates peak,"