UK House Prices Edge Higher in July, Nationwide Says

2]5r]bc{kb}snv6z5)ku9ya5_media_dl_1.png Nationwide Building Society

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(Bloomberg) — UK house prices returned to growth in July, one of the country’s largest mortgage lenders said, as buyers weather higher borrowing costs linked to the Iran war better than expected.

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The average price of a home rose 0.1% to £277,542 ($373,360), according to Nationwide Building Society. It was the first gain three months and in line with the median expectation of economists.

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The housing market has held up relatively well in the face of a global energy crisis and a change in prime minister at home. Mortgage approvals recovered in June, while households are drawing on savings to keep spending even as the Iran war pushes up living costs.

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“Steady house prices reflect a housing market that continues to find balance despite ongoing economic and political change,” said Nathan Emerson, CEO at Propertymark.

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The outlook remains fragile, however. Mortgage rates remain well-above their pre-Iran levels, with the prospect of a rapid recovery in energy supplies looking increasingly remote after the breakdown of a truce between the US and Iran.

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Bank of England officials kept interest rates on hold on Thursday but warned they may need to rise if Middle East conflict persists.

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Property agents also report that uncertainty over new Prime Minister Andy Burnham’s economic plans is starting to weigh on demand. The Royal Institution of Chartered Surveyors said more agents saw declining buyer inquiries and falling house prices, and expect values and sales to remain under pressure in the near term.

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In the early days of the Middle East conflict, buyers rushed to lock in mortgage deals before borrowing costs climbed further. That boost has now faded, with average two-year fixed-rate mortgages still around 0.8 percentage point higher than before the war at 5.62%, according to Moneyfacts.

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“Market activity and house prices have remained soft in recent months, in part reflecting the uncertain economic backdrop,” said Robert Gardner, Nationwide’s chief economist. “Geopolitical tensions remain high, with the conflict between Iran and the US again exerting upward pressure on energy prices and market interest rates in recent weeks.”

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