UK house prices increased 0.2% month-on-month in August to reach an average of £275,465, according to Nationwide, marking the first monthly rise since April and exceeding analyst forecasts of a 0.1% increase.
The rise follows a three-month decline in prices after Nationwide revised July’s figures from a 0.1% increase to a 0.1% fall. On an annual basis, house prices were up 1.6% compared to August last year, though this fell short of economists’ forecast of a 2% annual increase.
Market remains cautious ahead of rate decision
The housing market appears to be in a holding pattern as participants await the Bank of England’s monetary policy committee vote on 17 September, which will determine whether the base rate rises from its current 3.75%.
Ian Futcher, a financial planner at Quilter, noted that recent expectations for interest rates have been influenced by geopolitical tensions in the Middle East. “While a hold remains the most likely outcome, it is becoming increasingly difficult to call with confidence,” Futcher said. “For borrowers, the key message is that rates may not have peaked.”
Markets currently do not expect the MPC to raise rates this month but are pricing in a 0.25% increase by December. The uncertainty surrounding future rate movements has contributed to subdued buyer confidence, potentially impacting property transaction volumes in the coming months.
Affordability dynamics shift
Despite the monthly increase, the average UK property remains valued more than £3,000 below the £278,880 Nationwide estimated in April. Robert Gardner, chief economist at Nationwide, said the latest increase in the energy price cap, which will result in bills hitting a three-year high this winter, had not yet affected buying and selling activity.
“Underlying affordability is improving as house price growth remains well below earnings growth, although some of these gains have been offset by higher mortgage rates,” Gardner said. “Nevertheless, this suggests that activity should regain momentum in the quarters ahead, providing the energy shock wanes and confidence returns.”
The dynamics between house price growth and earnings could influence broader housing policy discussions as affordability concerns remain a key factor in the UK property market.
Outlook
The modest monthly increase suggests the UK housing market is stabilising after recent declines, though uncertainty around interest rates and energy costs continues to weigh on buyer sentiment. Market participants will be closely monitoring the Bank of England’s decision later this month for signals on the direction of borrowing costs.
