According to the Nationwide building society, UK house prices have defied expectations by experiencing a slight growth in June. However, on an annual basis, prices have fallen at the fastest rate since 2009 due to the impact of soaring mortgage costs on the market.
The unexpected monthly increase of 0.1% reversed the 0.1% decline observed in May, surprising economists who had forecasted a 0.3% decrease. As a result, the average cost of a house in the UK rose slightly to £262,239. Although prices in June were 3.5% lower compared to the previous year, it was a smaller annual drop than the 4% decline predicted by economists.
In the wake of the Bank of England's half-point increase in interest rates to 5% in June, two-year fixed-rate mortgage rates have continued to rise above 6%. This has further strained the ability of prospective homeowners to purchase properties. The average two-year fixed deal climbed slightly to 6.39% from 6.37% the previous day, as reported by Moneyfacts. Additionally, the average five-year fixed-rate mortgage increased to 5.96% from 5.94%.
The latest figures from HM Revenue and Customs have highlighted signs of a faltering housing market in the short term. According to the data, home sales experienced a significant decline of 27% year on year in May.
These high mortgage rates are not only affecting buyers but also placing pressure on sellers, with indications that some are beginning to accept lower offers, as noted by Zoopla.