This July, UK house prices recorded their biggest jump in the last 18 months. While interest rates remain undeniably high, pinching many from buying homes, experts believe that things will slowly return to normalcy when wages rise and the cost of borrowing becomes cheaper.

According to Nationwide, UK house prices have been growing at their fastest for 18 months. The average house price in the UK went up to £266,334 in July from the previous month, rising 0.3 for June. House price annual growth leapt from 1.5% in June to 2.1% in July, the highest since December 2022.

Their chief economist Robert Gardner said that while borrowing has risen, the housing market in the country has remained steadfast with around 60,000 mortgage approvals every month. This is some 10% down on the levels before the pandemic. However, it could be counted as pretty respectable in today’s rate environment. He added high rates on mortgages are still an important challenge, and it will not be easy for many to buy.

Mortgage Rates and Their Impact

Recently, some lenders cut rates by up to 0.20 percentage points, including Halifax, NatWest, and Santander. Nationwide, the UK’s biggest lender, even got in on the act by offering a sub-4% deal for new buyers. However, they are far higher than before the pandemic and shortly after, in fact, when the cost of borrowing was so much lower.

For example, a borrower who holds a 25% deposit would secure a five-year fixed rate a shade below 4.6%. That is more than double the average rate of 1.9% in 2019. This has been shutting out the ways of buying homes for many. Gardner reported it would gradually get better as wages rise quicker than house prices, and borrowing costs ease a bit.

Market Reaction And Expectation

Foxtons chief executive, Guy Gittins, said that the property market has been gaining momentum throughout the course of this year. The market does not stop growing despite economic woes and a snap election. It only seems like buyers and sellers woke up and resumed doing business under the adage “life must go on”.

As Marc von Grundherr, director at Benham and Reeves estate agents puts it, this rapid increase in house prices attests to how much the market conditions have improved this year while, at the same time, it reflects the high confidence in buyers.

Future Outlook

While the rise in UK house prices has accelerated, high mortgage rates seem to be a barrier for the majority of potential buyers. In view of an improvement forecasted in pay growth and a partial easing in the cost of borrowing, the goal may turn out to be more achievable for purchasers during the next year or so.

Stable Activity of the Housing Market

Housing market activity is steady. The high mortgage rates make the situation somewhat hopeful considering that about 60,000 mortgage approvals take place on a monthly basis. This rate is somewhat encouraging in the context of the housing activity, as it still demonstrates an element of demand for houses going by the encouraging statistics.

High levels of mortgage rates: Barrier

The high mortgage rates are proving to have a great impact, making it hard for prospective buyers. The average five-year fixed-rate mortgage is hovering at about 4.6%, far above the average of 1.9% just a few years ago, in 2019. This makes affording the monthly payments for a new home difficult for a lot of people. However, some lenders are starting to cut back slightly, which could go some way toward making mortgages more affordable.

Positive Signs for the Future

There are some bright signals on the horizon, however. With wages rising more quickly than house prices, and with borrowing costs falling, it should get easier for people to afford a home. This gradual improvement should help more people get into the housing market.

Confidence in the Market

Confidence for the market is quite high. Despite all the adversities, buyers and sellers both are moving on. This proves that human beings are very positive about the future of the housing market.

UK house prices are experiencing the fastest rise rate in the last 18 months although to most buyers, high mortgage rates do present a significant obstacle. The housing market is holding steady, and positive news is developing with wages on the increase and the cost of borrowing falling. The confidence in the market continues to be high because buyers and sellers continue to advance on their plans despite the challenges.