The UK housing market showed tentative signs of improvement in June, with house prices recording their first monthly rise in four months as easing mortgage costs helped support buyer confidence.
According to the latest Lloyds House Price Index, average house prices increased by 0.2% during the month, with the average property value at £299,330. Annual growth also edged slightly higher, up 0.6%, up from 0.5% in May.
Market stabilising after a period of uncertainty
Although the gains were modest, they show the market is stabilising after a period of uncertainty driven by concerns over inflation, fluctuating interest rate expectations and stretched affordability.
Amanda Bryden, Head of Mortgages at Lloyds, said the latest figures are a reflection of a market that remains cautious but is benefiting from improving borrowing conditions.
She said: “House prices rose for the first time in four months during June, increasing by +0.2%, compared to May.
Affordability stretched
“While affordability remains stretched for many buyers, mortgage rates have eased from their recent highs, offering some encouragement to those considering a move.”
The lender also noted that mortgage approvals fell sharply in May, down 14.9% compared to the previous month. It added that this was not unexpected given the spike in mortgage rates seen earlier in the year and expects activity to recover if borrowing costs continue to ease.
Housing transactions remain relatively robust
Housing transactions, though, remain relatively robust, with sales volumes in the three months to May running 1.2% above the previous three-month period and 16.6% higher than a year earlier.
There were also welcome signs of resilience among first-time buyers. Annual price growth for this sector increased to 0.8% in June from 0.3% in May, with the average first-time buyer property now costing £240,433. Lloyds said this shows demand at the lower end of the market remains relatively strong despite ongoing affordability challenges.
There continues to be a clear north-south divide. Northern Ireland is, once more, the strongest-performing part of the UK housing market, with prices rising 7.4% annually to £229,000. Scotland recorded annual growth of 3.9%, and Wales’ average values increased by 0.9%. In England, the North East and North West led growth at 2.8% and 2.4% respectively. In contrast, prices fell by 2.0% in the South East and by 1.1% in London.
Property industry welcomes return to growth
The property industry welcomed the return to growth, claiming it is further evidence that buyers are adapting to the current interest rate environment.
Verona Frankish, CEO of estate agency group Yopa, said: “It’s encouraging to see house prices edge upwards once again, reinforcing the resilience we’ve seen across the market in recent months.
“Buyers are no longer sitting on the sidelines waiting for dramatic shifts in mortgage rates and are instead making decisions based on their individual circumstances.”
Improving mortgage competition
Others highlighted improving mortgage competition as a key factor behind growing confidence. Iain McKenzie, CEO of The Guild of Property Professionals, said: “A steady Bank Rate has given lenders greater confidence to compete, and we’ve already seen mortgage pricing begin to edge down, which will improve affordability and borrowing power for many households,” he said.
Attention will now turn to whether falling mortgage rates translate into stronger market activity over the summer. Even though Lloyds expects lower borrowing costs to support demand, affordability remains a challenge and recent mortgage approval figures suggest some buyers are still taking a cautious approach. Inflation and interest rate expectations are likely to remain the key factors shaping market conditions during the second half of the year.
