The Nationwide Building Society reported that UK house prices were flat in June, with no monthly change in its house price index. This stagnation comes as households face higher energy bills and persistent inflation, dampening demand in the housing market.
Nationwide Index Details
Nationwide's data showed that the average UK house price in June was £266,064, unchanged from May. On an annual basis, prices rose by 0.6%, a slight slowdown from the 0.9% annual increase recorded in May. The building society noted that the market remains subdued due to affordability pressures.
According to Robert Gardner, Nationwide's chief economist, "The housing market continues to be constrained by higher interest rates and the rising cost of living, which have reduced buyer confidence." He added that the outlook remains uncertain as the Bank of England maintains its tight monetary policy.
Impact of Energy Bills and Inflation
The flat reading coincides with the latest increase in the energy price cap, which raised typical household bills by £94 a year from July. Inflation, while easing from its peak, remains above the Bank of England's 2% target, further squeezing household budgets.
Higher mortgage rates have also weighed on the market, with the average two-year fixed rate now above 5.5%. This has made it harder for first-time buyers to enter the market and for existing homeowners to remortgage.
Regional Variations
Nationwide's report highlighted regional differences, with Northern Ireland and Scotland seeing stronger price growth, while London and the South East experienced declines. The overall trend, however, points to a broad-based slowdown across the UK.
Gardner commented, "While we are seeing some regional variation, the general picture is one of stagnation as affordability constraints bite." He emphasized that the market is likely to remain subdued until there is a significant improvement in economic conditions.
Outlook
Economists expect house prices to remain under pressure in the coming months, with some predicting modest declines later in the year. The Bank of England's next interest rate decision is due in August, and any further rate hikes could exacerbate the slowdown.
Despite the flat reading, the housing market has proven more resilient than many feared, with prices still above pre-pandemic levels. However, the combination of high inflation, rising energy costs, and elevated mortgage rates is expected to keep the market in a holding pattern.
