House price growth hits three-year low…

House price growth and inflation has continued to slow but there are warnings that further interest rate cuts could still dent buyer budgets and hit the housing market.

The latest Land Registry House Price Index for June, released yesterday, showed annual growth has slowed from 1.8% to 1.7%.

It is the lowest rate of growth since the pandemic when a figure of 2.41% was registered in August 2020.

Monthly price growth also slowed from 0.8% in May to 0.7% in June putting average prices at £287,546.

Annual house price inflation was highest in the North East where prices increased by 4.7% in the 12 months to June 2023. 

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London was the English region with the lowest annual growth, where prices decreased by 0.6%.

It comes as inflation slowed from 7.9% in June to 6.8% last month, giving hope of an end to further interest rate rises.

But recent record wage growth figures have led analysts to warn that the Bank of England may continue pushing interest rates upwards, with expectations that they could peak at 6%.

This would affect affordability for buyers as mortgage pricing could be higher.

Tom Bill, head of UK residential research at Knight Frank, said: “Strong wage growth is normally a positive sign for the UK property market, but in 2023 it will keep interest rates higher for longer, which will hurt demand. 

“Some lenders are cutting rates but this week’s stubbornly-high core inflation figure shows the pressure on anyone buying or re-mortgaging won’t relent any time soon.

“While we expect UK prices to fall by 5% this year, demand should prove more resilient than expected given the shock-absorber effect of strong wage growth, lockdown savings, the availability of longer mortgage terms, flexibility from lenders and the popularity of fixed-rate deals in recent years. Long-standing affordability constraints mean that London continues to underperform and the gap between the capital and the rest of the country has become slightly less pronounced.”

Nathan Emerson, chief executive of agency trade body Propertymark, insisted that the housing market remains strong for both buyers and sellers.

He said: “Sellers are making a gain on their properties’ price and buyers are able to negotiate to find a middle ground.

“After positive inflation news has bought the potential for a peak in interest rates sooner than previously expected, there is also some hope that fixed mortgage rates will start to fall. Even as they remain high compared to recent standards.”

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