LONDON (Reuters) - British house prices rose in July at the slowest monthly pace in a year and the market is likely to slow further as the cost-of-living squeeze tightens and the Bank of England keeps on raising interest rates, mortgage lender Nationwide said on Tuesday.
House prices last month were 0.1% higher than in June when they rose by 0.2%. It was the weakest increase since July of last year and was below the median forecast in a Reuters poll of economists for an increase of 0.3%.
In annual terms, prices were 11.0% higher than in July 2021, speeding up from growth of 10.7% in June but weaker than expected by all economists in the Reuters poll.
Robert Gardner, Nationwide's chief economist, said the housing market had been surprisingly buoyant so far, given the strains on households' budgets and consumer confidence plunging to a record low.
"We continue to expect the market to slow as pressure on household budgets intensifies in the coming quarters, with inflation set to reach double digits towards the end of the year," Gardner said.
Higher BoE interest rates would also cool the market if mortgage rates rose accordingly, he said.
Britain's housing market has shown signs of cooling after the surge in demand for bigger homes during the COVID-19 pandemic which was turbo-charged by a now-expired tax cut for buyers.
Last week, data from the BoE showed the lowest level of new mortgage approvals in June in two years and banks and building societies are braced for the biggest fall in demand for mortgages since mid-2020.
The BoE has raised interest rates five times since December as it tries to deal with the surge in inflation and it is expected to increase borrowing costs again on Thursday with the scale of the hike the only question for investors.