(RTTNews) - UK house prices dropped for the first time in four months in August despite the fall in mortgage rates, data released by the mortgage lender Nationwide Building Society revealed Friday.
House prices posted a monthly fall of 0.2 percent, reversing July's 0.3 percent increase.
Meanwhile, on a yearly basis, house price inflation accelerated to 2.4 percent from 2.1 percent in July. This was the fastest since December 2022.
"While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings," Nationwide's Chief Economist Robert Gardner said.
Provided the economy continues to recover steadily, housing market activity is set to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth, Gardner added.
Capital Economics' economist Ashley Webb said the small fall in house pries suggests that affordability constraints continue to bite despite the recent declines in mortgage rates.
The bank rate is expected to fall to 3.00 percent by the end of next year, the economist said. This would lead to the fall in mortgage rates to below 4.0 percent in 2025, resulting in house prices rising by an above consensus 5.0 percent in the fourth quarter of 2025, said Webb.
At the August meeting, the Bank of England had lowered its benchmark rate for the first time since the onset of the coronavirus pandemic. The bank rate was reduced by 25 basis points to 5.00 percent from 5.25 percent, which was the highest since early 2008.
