UK house prices rose 1.8 per cent in the year to July, slowing from 2.2 per cent growth in June, as higher mortgage rates and fears of future tax changes kept would-be movers on the sidelines, according to Nationwide Building Society.
The typical home sold for £277,542 in July, just £58 more than the £277,484 recorded in June.
Nationwide chief economist Robert Gardner said geopolitical tensions were a key factor, noting that the conflict between Iran and the US had been pushing up energy prices and market interest rates in recent weeks. The Bank of England held its base rate at 3.75 per cent but did not rule out a rise later in the year if the conflict stokes inflation.
Many banks had already raised mortgage rates ahead of the Bank of England decision. The average mortgage rate started the year at 4 per cent and now stands at around 4.75 per cent, adding more than £1,500 a year to the cost of buying an average-priced home, according to property website Zoopla.
Political uncertainty added to the slowdown. Tom Bill, head of UK residential research at Knight Frank, said speculation over tax rises since Andy Burnham became Prime Minister had weighed on the market. He noted that Burnham had moved to rule out replacing stamp duty with a land value tax, but said the annual uncertainty over potential tax rises in the Budget had not gone away. A more severe mansion tax and a new levy to replace council tax have also been rumoured.
Nicholas Finn, managing director of Garrington Property Finders, said the conditions had left buyers in a strong position, particularly in London and the South East where the supply of homes for sale was plentiful. He said buyers with their finances in order had their pick of properties and could often secure sizable discounts off the asking price. Finn added that borrowing costs remained a barrier for some and that a fall in rates could release demand that had built up over recent months.
