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UK house prices declined on a monthly basis for the first time in over a year in July, figures from mortgage lender Halifax showed on Friday.
House prices in the UK declined 0.1% on a monthly basis in July, defying expectations of a 0.9% rise, according to FXStreet. In June, prices had risen 1.4% from May.
‘Following a year of exceptionally strong growth, UK house prices fell last month for the first time since June 2021, albeit marginally. This left the average house price at £293,221, down £365 from the previous month's record high,’ Halifax Managing Director Russell Galley said.
On an annual basis, growth slowed to 12% in July, from a 13% hike in June.
Galley added: ‘While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time. Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.’
The UK housing market re-emerged from the initial spring 2020 lockdown strongly, benefiting from temporary stamp duty relief.
In March 2021, Rishi Sunak, the chancellor at the time, extended the stamp duty cut granted in 2020 to the end of June 2021 at a £500,000 nil rate band, which was then tapered to a £250,000 threshold until the end of this past September.
Since then, there have been concerns the housing market would cool, with rampant consumer price inflation and rising interest rates also hitting the sector. The Bank of England enacted its largest interest rate hike in 27 years on Thursday, lifting the benchmark rate to 1.75%.
Galley added: ‘That said, some of the drivers of the buoyant market we've seen over recent years such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident. The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
‘Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold. Therefore a slowing of annual house price inflation still seems the most likely scenario.’
Halifax's figures contrast with a reading from Nationwide earlier this week.
Mortgage lender Nationwide's latest tracker showed house prices surged 11% year-on-year in July, quickening slightly from a 10.7% hike in June. The monthly rise came in at a more modest 0.1% in July. House prices had risen 0.2% in June from May, according to Nationwide.
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