According to data by Nationwide, the average UK house price rose 0.6% month on month, taking the annual growth rate to 2.4%, up from 2.1% in June

UK house prices recorded a modest increase in July, as easing mortgage costs and stronger wage growth continued to support buyer demand.

According to data by Nationwide, the average UK house price rose 0.6% month on month, taking the annual growth rate to 2.4%, up from 2.1% in June. The average home now costs £272,664, compared with £271,619 the previous month.

July saw a modest pick-up in the rate of annual house price growth to 2.4%, from 2.1% in June, said Nationwide’s chief economist Robert Gardner. Prices increased by 0.6% month on month, after taking account of seasonal effects.

Gardner added that, despite recent volatility, activity levels remain broadly stable.

Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well, he said. Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.

Affordability has shown signs of steady improvement following a sharp post-pandemic decline. The house price-to-earnings ratio now stands at approximately 5.75, which is the lowest level in more than a decade.

After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates, Gardner said.

While the price of a typical UK home is around 5.75 times average income, this ratio is well below the all-time high of 6.9 recorded in 2022 and is currently the lowest this ratio has been for over a decade, he added. This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan-to-value mortgages.

Borrowing costs have also begun to moderate.

The interest rate on a typical five-year fixed-rate mortgage is around 4.3% (for a borrower with a 25% deposit), Gardner said. This is still over three times the all-time lows prevailing in autumn 2021, but well below the highs of circa 5.7% reached in late 2023.