UK House Price Growth Stagnant

By Stewart Douglas

United Kingdom house prices barely rose over the last month, reflecting the impact of higher interest rates on the UK economy.

House prices throughout the United Kingdom rose by just 0.1% over the course of July, taking the year average growth rate to 9.9% from 11.1% as at last month.

After several years of stable economic growth and low interest rates, the Bank of England base interest rates have been raised to 5.75%, with an increasing likelihood of reaching 6% over the next few months, in order to curb the rising threat of inflation.

The fifth interest rate rise of this year appears to have halted the rapid housing market growth, which has proven startling over the last decade with strong UK economic performance.

This also seems to have had an effect on the average house price, with minimal growth this month dramatically lowering the year-on-year average. 

The increasing price of borrowing, in addition to the impact of rising inflation on income, seems to have dissuaded many first time home buyers, and suppressed the value of offers for those buying property.

Nationwide Building Society, heavily involved in the United Kingdom mortgage market, have predicted that prices will continue to slow down over the course of this year, as more and more borrowers begin to feel the pinch.

Nationwide economist Fionnuala Earley has blamed the rising interest rates and squeezing financial pressures for the recent, and apparently ongoing house price slowdown.

“Fundamentals do suggest that household finances are coming under considerable pressure, and that house prices and consumer spending will both see a slowdown in the second half of the year. The sharp slowdown in July’s house price numbers could show that potential homebuyers are thinking twice about overstretching themselves in a higher interest rate environment.”