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News Update: UK house prices rise 11% annually despite cost of living crisis

A strong labor market and limited housing stock helped support annual growth in UK house prices by double-digits in July, despite rising interest rates, high inflation and lower affordability.

UK house prices rose at an annual rate of 11 per cent last month, up slightly from 10.7 per cent in June, according to mortgage provider Nationwide.

The increase took the average house price to £271,209, £55,000 above the level in February 2020, before the Covid-19 pandemic.

“Demand continues to be supported by strong labor market conditions,” said Robert Gardner, chief economist at Nationwide. “At the same time, the limited stock of homes on the market has helped to keep upward pressure on house prices.”[ads1];

Line chart of average house price, £'000 showing UK house prices rose in July

However, the impact of inflation at 9.4 per cent for 40 years and record low consumer confidence was highlighted by a freeze in mortgage transactions managed by Nationwide.

Total housing market transactions in the three months to May were about 20 per cent below the elevated levels brought on by the stamp duty holiday, Nationwide reported. Nevertheless, they were still 5 percent above pre-pandemic levels.

Home mover transactions with mortgages have declined more than other sectors, while first-time buyers have remained robust.

This is despite house price growth continuing to exceed earnings by a wide margin, which increases the required deposit. Together with higher interest rates, these have pushed mortgage repayments up in relation to income.

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