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House prices in the UK remained unchanged on a monthly basis in June, while annual growth slowed slightly below market expectations, according to Nationwide Building Society. The housing market continued to feel the impact of higher mortgage costs and economic uncertainty linked to the Middle East conflict. However, easing expectations of further interest rate hikes by the Bank of England have improved the outlook for affordability. Although mortgage approvals declined in May, lower borrowing cost expectations and government efforts to boost housing supply could support housing market activity in the coming months.
British house prices remained flat in June compared to the previous month, while annual price growth came in below expectations, reflecting a moderation in the housing market after a strong start to 2026. According to Nationwide Building Society, house prices increased 2.2% year-on-year, lower than the 2.4% forecast by economists. This followed a surprise 0.6% monthly decline in May, indicating that buyers continue to remain cautious amid higher borrowing costs.
The housing market has been under pressure in recent months as the conflict in the Middle East pushed up energy prices and mortgage rates. The increase in borrowing costs reduced affordability and weakened buyer confidence, slowing the pace of house price growth. Nationwide's Chief Economist Robert Gardner said the recent slowdown was expected given the uncertainty created by developments in the Middle East and the rise in energy prices and market interest rates. He added that if energy-related pressures continue to ease, the Bank of England may not need to raise interest rates as much as previously anticipated, which would improve affordability for homebuyers.
Recent data from the Bank of England also pointed to weaker housing activity, with mortgage approvals for house purchases recording their sharpest monthly decline since December 2023 during May. The central bank kept its benchmark interest rate unchanged at 3.75% during its latest policy meeting, while financial markets currently expect the first quarter-point rate increase to come in early 2027 rather than this year.
Gardner also said that if current market trends continue, improving affordability and stronger household confidence could support a recovery in housing market activity over the coming quarters, provided domestic political uncertainty does not weigh on consumer sentiment. Market analysts also noted that easing energy prices have helped soften expectations of further monetary tightening, offering some relief to prospective buyers after mortgage rates climbed earlier this year.
Housing supply, however, remains a challenge. The UK government has been working to accelerate new home construction, but the limited number of properties available for sale is expected to continue supporting house prices. Former Prime Minister Keir Starmer had prioritised faster homebuilding during his tenure, while Andy Burnham, who is widely expected to succeed him, has pledged to launch the country's largest local authority-led social housing programme since the years following the Second World War. If implemented, the programme could gradually improve housing supply over the longer term.
Source Reuters
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