UK house prices increased for the first time in four months in August, according to a leading index, as buyers and sellers remained in a “holding pattern” before an expected increase in interest rates later this year.
The average price of a British home rose 0.2% month on month in August to £275,465, the first increase since April, according to Nationwide. Analysts had forecast a 0.1% rise.
The increase follows a three-month decline in prices after Nationwide revised a month-on-month 0.1% rise in July to a fall of 0.1%.
Ian Futcher, a financial planner at Quilter, said the UK housing market was awaiting the outcome of the next vote by the Bank of England’s monetary policy committee on 17 September on whether to raise the base rate of interest from its current 3.75%.
“Over recent months, expectations for interest rates have been driven by the stop-start nature of the conflict in the Middle East,” Futcher said. “That leaves the housing market in something of a holding pattern ahead of the next interest rate decision.
“While a hold remains the most likely outcome, it is becoming increasingly difficult to call with confidence. For borrowers, the key message is that rates may not have peaked. Until that uncertainty lifts, buyer confidence is likely to remain subdued.”
After three months of falling prices, the average UK property remains valued more than £3,000 less than the £278,880 Nationwide estimated in April.
On an annual basis, house prices were up 1.6% on the same month last year, ahead of the 1.4% year-on-year increase in July. However, that was below economists’ forecast of a 2% annual increase.
Markets do not expect the MPC to raise rates this month but are pricing in a 0.25% increase by December.
Robert Gardner, the chief economist at Nationwide, said the latest increase in the energy price cap, which will result in bills hitting a three-year high this winter, had not yet affected buying and selling activity.
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“While the latest energy price shock poses inflation risks, there have been encouraging signs that it is not feeding through to underlying price pressures,” he said. “Underlying affordability is improving as house price growth remains well below earnings growth, although some of these gains have been offset by higher mortgage rates. Nevertheless, this suggests that activity should regain momentum in the quarters ahead, providing the energy shock wanes and confidence returns.”
On Tuesday, the Bank of England released data showing that the number of mortgage approvals made to homebuyers fell to its lowest level in more than two years in July.
In July 56,053 mortgages were approved for house purchases, the lowest monthly figure since January 2024, when there were 56,032 approvals.
There were 58,215 mortgage approvals made to homebuyers in June and over the past six months monthly mortgage approvals for house purchases have averaged about 60,800.