Nationwide house price survey: UK prices fall by 3.8% in July marking biggest annual drop since 2009

The average UK house price has fallen by 3.8% in July, marking the weakest reading since July 2009, according to Nationwide Building Society.

Nationwide said the average UK house price in July was £260,828 - 4.5% below the August 2022 peak.

House prices have fallen by 0.2% over the month as the annual rate of house price growth stood at 3.5% in June and the average UK house price last month was £262,239.

Nationwide’s chief economist Robert Gardner said housing affordability “remains stretched for those looking to buy a home with a mortgage” as an increase in interest rates in recent months have made it more challenging.

He added: “For example, a prospective buyer, earning the average wage and looking to buy the typical first-time buyer property with a 20% deposit, would see monthly mortgage payments account for 43% of their take home pay (assuming a 6% mortgage rate).

“This is up from 32% a year ago and well above the long-run average of 29%. Moreover, deposit requirements continue to present a high hurdle – with a 10% deposit equivalent to 55% of gross annual average income.”

Data from the Bank of England released on Monday (31 July) showed that mortgage approvals in the UK rose to their highest level since October 2022 last month.

That indicates borrowers were scrambling to secure home loan deals earlier this year before interest rates rose higher.

Thomas Pugh, an economist at the audit, tax and consulting firm RSM UK, said: “The rise in mortgage approvals probably represents a scramble to secure a deal before cheaper mortgage products were pulled from the market in the wake of the surge in interest rate expectations at the end of May.

“With interest rates on mortgages continuing to rise, the average two-year fixed-rate mortgage deal broke above 6% in June, we expect the peak in house prices to fall by around 10% with the risk of bigger falls if the base rate rises above 6%.”

In June, the Bank rate, set by the Monetary Policy Committee, went to 5% from 4.5% - its highest level for 15 years.