UK house price inflation eased more than expected to a six-month low in June, but remained strong overall reflecting the improvement in the labor market, survey results from the Nationwide Building Society showed on Thursday.
The house price index logged a double-digit growth of 10.7 percent year-over-year in June, slightly slower than an 11.2 percent rise in May. That was just below the 10.8 percent increase expected by economists.
Moreover, this was the weakest house price inflation since December last year, when prices had climbed 10.4 percent.
On a monthly basis, house prices moved up 0.3 percent in June, following a 0.9 percent rise in the previous month. Nonetheless, this was the eleventh successive monthly increase.
The average price for a UK home rose to a new record high of GBP 271,613 in June, with average prices increasing by over GBP 26,000 in the past year.
Most regions indicated a slight slowing trend in the June quarter. The South West overtook Wales as the strongest performing region, while London remained the weakest.
The housing market is expected to slow further as pressure on household finances intensifies in the coming quarters, Robert Gardner, Nationwide’s chief economist said.
Inflation is set to reach double digits and the Bank of England is widely expected to raise interest rates further which will also exert a cooling impact on the market if this feeds through to mortgage rates, Gardner noted.
The BoE had raised its benchmark rate over the last five consecutive meetings to curb inflation amid the labor market tightness.
With the BoE poised to hike rates to 3 percent next year, mortgage rates will continue to rise and that will further stretch affordability, Capital Economics economist Andrew Burrell said.
After an 8 percent annual rise this year, modest house price falls will follow in 2023 and 2024, reducing price levels by around 5 percent from the peak, the economist added.
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