There was a modest rebound in annual house price growth in July, up 2.5% year-on-year while prices role 0.6% month-on-month, the Nationwide House Price House has found.
Nonetheless, annual house price growth remains within the fairly narrow range of c2-3% which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘The slow growth in prices, which we have seen over the past few months, is continuing.
“Supply and demand remain broadly in line and the shortage of stock, as well as low interest and jobless rates, prevent a larger fall.
“This balance is likely to be disturbed by even a modest increase in mortgage rates, even though relatively few borrowers will be affected by the change as they are on fixed-rate mortgages.
“But the direction of travel always seems to have an adverse impact on confidence and is likely to reduce low levels of transactions even further.”
Robert Gardner, Nationwide’s chief economist, added: “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.
“Overall, we continue to expect house prices to rise by around 1% over the course of 2018.”
Steve Seal, director of sales and marketing, Bluestone Mortgages, thought the rise was relatively modest and highlighted that the self-employed and contractors still need help getting ont o the housing ladder.
He said: “Although house price inflation has creeped up, when we compare these numbers to a few years ago with near-double digits, this rise is still relatively modest.
“However, this doesn’t mean all borrowers have an equal chance of stepping onto the property ladder. Self-employed workers, contractors and freelancers usually struggle to secure lending due to their complex income streams being incorrectly labelled ‘high-risk’.
“The UK workforce is changing, and it is unfair that these groups of borrowers are not given the same opportunities as others.”
Gardner predicted an interest rate rise of 0.25% which he said would have a modest impact
He said: “It is looking increasing likely that the Bank of England’s Monetary Policy Committee (MPC) will increase rates at their next meeting on 2nd August.
“Providing the economy does not weaken further, the impact of a further small rise in interest rates on UK households is likely to be modest. This is partly because only a relatively small proportion of borrowers will be directly impacted by the change.
“Moreover, a 0.25% increase in rates is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an interest rate increase of 0.25% would increase monthly payments by £16 to £700 (equivalent to £190 extra per year).
“The MPC has also continued to signal that it expects any increases in interest rates to be gradual and limited. Financial market pricing suggests that Bank Rate is only likely to rise to around 1.25% over the next five years.
“And, for those, some of whom will be on variable rates, any rate rise will be a struggle, even though the impact on the wider economy and most households is likely to be modest.”
Russell Quirk, founder and chief executive at Emoov, Quirk, added: “While even the predicted increase to 0.75% will see mortgage availability remain very affordable for many, it will have implications for those borrowed up to the teeth, or considering it, in order to get a foot on the ladder.
“That said, in many areas, asking prices are continuing to realign themselves with wider market conditions and so a marginal increase in the cost of borrowing shouldn’t deter those in the appropriate position to buy.”