UK house price growth slows to 1.7% as London property values fall

UK house prices rose only 1.7% in the 12 months to June, down from a revised 1.8% in May, amid surging mortgage rates and high inflation. It was the smallest rise since July 2020.

The average home sold for £287,546 during the month, according to the Office for National Statistics (ONS) on Wednesday, which has declined £5,000 in value since house prices peaked in November.

Average house prices increased over the past year to £306,000 in England, a 1.9% rise, £213,000 in Wales (0.6%) and £174,000 in Northern Ireland (2.7%), while average Scottish house prices (£189,000) remained little changed.

The North East saw the highest annual percentage change of all English regions in the 12 months at 4.7%, while London saw the lowest with a negative reading of -0.6%. The average property in the capital sold for £527,979, £11,627 less than in the autumn.

Meanwhile, the measure of private rents rose by 5.3% in the 12 months to July, the biggest increase since data collection began in 2016.

Read more: UK inflation eases to 17-month low of 6.8% in year to July

“It’s increasingly clear that the property market is going through a correction rather than a crunch," Jonathan Hopper, chief executive of Garrington Property Finders, said.

"While the slowdown in transactions and widespread falls in prices are undeniable, they’re not universal."

He added: "While higher interest rates are now hurting thousands of homeowners each month when they come to remortgage, they haven’t triggered the wave of distressed sales seen a decade and half ago.

“Constrained supply is helping prices fall gently, though for many would-be buyers the benefits are largely being cancelled out by the increased cost of mortgages and the reduction in the amount of money they can borrow.

“As a result, buyers with limited savings who are most reliant on credit are having to pare their budget right back, either by looking for a smaller home or by focusing on more affordable postcodes.

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The ONS data differs from those published by Halifax and Nationwide, which showed modest declines in recent months.

It comes as the Bank of England has hiked UK interest rates 14 consecutive times to 5.25%, the highest since the 2008 financial crisis, in a bid to tame runaway inflation.

This has had a knock-on effect on mortgage rates and those trying to get on the property ladder.

The average two-year fixed residential mortgage rate today is priced at 6.77%, according to Moneyfacts, down from 6.79% yesterday, and from the peak of 6.86%. The average five-year fix declined to 6.26%.

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