House prices grew by 0.3% in July, taking annual growth to 2.1%, according to Nationwide. This is the strongest rate of annual growth since December 2022, with three consecutive months of modest house price growth. But UK house prices still remain around 2.8% below their peak in the summer of 2022 in cash terms.

The more positive pattern of house price growth comes alongside a steady volume of mortgage approvals. The number of mortgage approvals has been fairly consistent over the last four months and was 12% higher in June 2024 compared to June 2023 when quoted mortgage rates were at a similar high level. So the more positive outlook for the market is giving confidence to buyers and lenders. 

Leading indicators suggest activity has picked up following the General Election. New instructions were up 7% for the month of July compared to the 2017-19 average for the month, while sales agreed were up 10%, according to TwentyCi. This marks a bounce-back from the quieter June reported by the latest RICS survey. 

The first bank base rate cut since the start of the pandemic will further support market activity. Market concerns that the first cut would be pushed to September were dismissed as MPC members voted by a slim majority to cut by 0.25% on 1st August. Mortgage lenders have responded by reducing rates on both variable and fixed-rate mortgages, with some sub-4% products reappearing on the market as competition increases. This may help mortgage approvals to recover further towards pre-pandemic levels, which they are currently c. 7% below.

But the Bank of England were keen to promote caution around expectation of future cuts. The MPC is keeping a close eye on inflation, which is expected to increase in the second half of the year as energy costs increase during the winter months. A slower than expected path of interest rate cuts may delay a full recovery in market activity and result in slower house price growth.

The more lagged Land Registry data shows that last year’s price falls were largest in the south. The biggest falls were in the south east of England, including Canterbury (-10.6%), Eastbourne (-7.6%) and Lewes  (-7.1%). Lower value markets in the north of England and Scotland saw the highest annual growth, including Inverclyde (10.9%), Preston (6.4%), and Renfrewshire (6.4%).

Annual rental growth across the UK in June was 5.7% according to Zoopla, relatively unchanged from May’s annual growth figure of 5.9%. The North East remained the region with the strongest annual growth (9.1%), followed by Scotland (8.0%). 

In London, rental growth continued to slow on an annual basis, decreasing to 2.6% as affordability pressures have continued. Private renters in London spent on average 42% of their income on rent (inclusive of housing support) according to the latest English Housing Survey, higher than any other region and the UK average of 32%. But both monthly and quarterly rental growth accelerated in London and the UK, suggesting tenants may have to stretch themselves further as competition increases during the busy summer lettings market.