House prices rebound in June - Nationwide

House prices in the UK rebounded in June, according to the latest survey from mortgage lender Nationwide.

Prices were up 1.1% on the month following a 0.2% drop the month before. On an annual basis, they rose 3.1%, up from 2.1% growth in May. Economists had been expecting prices to be flat on the month and up 1.8% on the year.

The average price of a house in the UK increased from £208,711 in May to £211,301 in June, with prices in London rising at the slowest annual pace since 2012, up 1.2% on the year.

Robert Gardner, Nationwide's chief economist, said: "The emerging squeeze on household incomes appears to be exerting a drag on housing market activity in recent months. The number of mortgages approved for house purchase has slowed a little in recent months and surveyors report that new buyer enquiries have softened.

"At this point it is unclear whether the increase in house price growth in June reflects strengthening demand conditions on the back of healthy gains in employment and continued low mortgage rates, or whether the lack of homes on the market is the more important factor. While survey data suggests that new buyer enquiries have softened, it also indicates that this has been matched by a decline in new instructions. Indeed, the number of properties on estate agents’ books remains close to all-time lows."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "June’s increase in house prices fully reverses the 0.9% decline seen over the previous three months and brings Nationwide’s measure in line with Halifax’s, which has shown a flat trend since the start of the year. The recent decline in mortgage rates and the contraction in the number of homes for sale are ensuring that prices hold broadly steady, despite the renewed squeeze on real wages.

"Looking ahead, the recent rise in wholesale funding costs, due to increased speculation that the MPC might raise interest rates soon, and the FPC’s decision to raise banks’ capital requirements yesterday likely will prevent mortgage rates from falling further. Even so, loan-to-income ratios have scope to rise a little further and surveys suggest that the number of homes being put up for sale still is contracting rapidly. Accordingly, we still expect house prices to be about 2% higher year-over-year by the end of 2017."