Average UK house price reaches record high of £217,010 in July
ANNUAL house price growth accelerated in July as the average property value hit a new record high of £217,010, according to an index.
Across the UK, house prices were up by 2.5 per cent annually in July, compared with a 2 per cent annual increase in June, Nationwide Building Society said.
House prices increased by 0.6 per cent month on month in July - the second month of increases in a row following a 0.7 per cent upturn in June.
With speculation that the Bank of England base rate could edge up on Thursday from 0.5 per cent to 0.75 per cent, Nationwide said a 0.25 percentage point rise is likely to have only a modest immediate impact on borrowers, many of whom are locked into fixed-rate deals.
Robert Gardner, Nationwide's chief economist, said: "Providing the economy does not weaken further, the impact of a further small rise in interest rates on UK households is likely to be modest.
"This is partly because only a relatively small proportion of borrowers will be directly impacted by the change.
"Most lending on personal loans and credit cards is fixed or tends to be unaffected by movements in the bank rate. Similarly, in recent years, the vast majority of new mortgages have been extended on fixed interest rates."
But, he continued: "While the impact for most borrowers is likely to be modest, it's important to note that household budgets have been under pressure for some time because wages have not been rising as fast as the cost of living.
"Indeed, in real terms (after adjusting for inflation) wage rates are still at levels prevailing in 2005."
Mr Gardner said that, overall, Nationwide continues to expect house prices to increase by 1 per cent over the course of 2018.
He said annual house price growth has remained at 2 per cent to 3 per cent over the past 12 months - "suggesting little change in the balance between demand and supply in the market".
Howard Archer, chief economic adviser at EY Item Club, said: "We suspect that any meaningful housing market upturn will remain elusive over the coming months.
"We expect house price gains over 2018 will be limited to a modest 2 per cent. At this stage, we expect prices to rise no more than 3 per cent in 2019.
"The fundamentals for house-buyers are likely to remain challenging - and they will not be helped by the Bank of England likely hiking interest rates from 0.5 per cent to 0.75 per cent on Thursday."
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "There is much anticipation that the Bank of England will raise interest rates this month and, if it does, this will inevitably have an impact on the housing market.
"It is true that many borrowers have been taking advantage of the competitively-priced fixed rates available and protecting their monthly payments against future rate rises."
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said that, while "relatively few" mortgage borrowers would be immediately affected by a rise in interest rates, "the direction of travel always seems to have an adverse impact on confidence and is likely to reduce low levels of transactions even further".