House prices soften as rate rises bite

House prices ticked lower in July, a closely-watched industry survey showed on Monday, as higher borrowing costs hit home.

According to the latest Rightmove house price index, house prices dipped 0.2% in July, compared to 0.0% growth in June.

The national average asking price is now £371,907, around 0.5% higher than July 2022 and the lowest annual growth since November 2019.

Rightmove said new sellers were tempering price expectations in response to rising mortgage costs and increasing buyer affordability constraints. The number of agreed sales is now 12% down on July 2019.

However, buyer demand remained resilient, Rightmove noted, up 3% on 2019. Surveyed agents said right-priced homes were still attracting buyers due to historical supply constraints.

Tim Bannister, director of property science at Rightmove, said: "The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market.

"While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises, when many felt they had stablished, have contributed to the fall in prices and number of sales agreed.

"However, buyer remains resilient."

The Bank of England has now increased the cost of borrowing 13 times since December 2021 as it struggles to bring down inflation. Interest rates currently stand at 5%, while inflation is 8.7%, well above its 2% target.