Growth in house prices fell to its slowest pace with ongoing pressure on household budgets and subdued economic growth.

The latest data from Nationwide Building Society shows UK annual house price growth has reduced to 2.0% pa and London was the weakest performing region down -1.9% year-on-year.

Most regions saw a slowdown in house price growth in the second quarter with average property values of £215,444 and only Scotland recorded a strong rise with 3.1% growth for the year.

This is the slowest pace of annual house price growth for five years, lower than the 2.4% per year recorded last quarter and there are few signs of an imminent change.

The lower rise in house prices and actual falls in London is good news for first time buyers as it gives them a chance to get on the property ladder with a smaller deposit.

East Midlands performing strongly

The strongest performing region was East Midlands with a rise in house prices of 4.4% over the year and average property values of £181,549.

This was followed by West Midlands with increases of 4.3% and Wales rising 4.0% for the year with Scotland improving the most this quarter up 3.1% for the year compared to last quarter rising only 0.2% for the year.

In the first quarter Northern Ireland posted an unusually strong performance up 7.9% over the year and for this quarter a modest 2.1% which is similar to the UK average.

For remortgage buyers the higher prices in these regions give them an opportunity to release capital which they can use to improve their home which could further increase the value.

Robert Gardner Nationwide Chief Economist said, subdued economic activity and ongoing pressure on household budgets are likely to continue to exert a modest drag on housing market activity and house price growth this year.

Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates, says Mr Gardner.

London recorded a fall in house prices

Most regions saw a slowing in their annual house price growth and London was the only region declining -1.9% year-on-year compared to the first quarter of -1.0% for the year.

There has been a slowdown in new purchases for buy-to-let investors after changes to stamp duty and taxation allowance on mortgage interest make it less attractive to buy.

Even with the falls average property values in the capital are £468,845 and remain 50% above their 2007 levels while prices for the UK are only 15% higher.

Older homeowners in London have accumulated considerable value in their properties and despite the falls, the equity release buyer can access this wealth using a lifetime mortgage to maintain their lifestyle, pay for holidays or home improvements.

Mr Gardner said, surveyors have continued to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.

For home movers the lack of supply of suitable properties within reach means it is harder to trade up requiring a much larger deposit to buy more expensive homes.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt, gift to a family member or even buy a more expensive home.

Learn more by using the property value tracker chart, mortgage costs calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.

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