House prices inched up in July, but buyers are still feeling the pinch.

The average price of a UK property rose by 0.3% last month, according to the latest figures from Nationwide. That means the average house will now set you back £266,334 – up from £266,064 in June.

This latest rise means house prices are now growing at an annual rate of 2.1%, the fastest pace since December 2022.

So, is the market heating up again?

While this is a step in the right direction, it’s important to remember that prices are still 2.8% lower than their peak in the summer of 2022.

What’s behind the rise?

Robert Gardner, Nationwide’s Chief Economist, says the market is being propped up by a steady number of buyers taking out mortgages. Around 60,000 mortgages were approved for house purchases in June – around 10% lower than before the pandemic, but still a decent number considering the current economic climate.

Interest rates still biting

The problem is that mortgages are still much more expensive than they used to be. The average five-year fixed-rate deal for someone with a 25% deposit is currently around 4.6%. That’s more than double the 1.9% average we saw back in 2019.

This means that many potential buyers are still finding it tough to get on the property ladder. The average first-time buyer is now having to fork out a whopping 37% of their take-home pay on mortgage repayments! That’s significantly higher than the 28% figure we saw pre-Covid.

What does the future hold?

Experts are predicting that the Bank of England will gradually start to lower interest rates in the coming years. This should hopefully lead to cheaper mortgages and make it easier for people to buy a home.

However, it’s unlikely that we’ll see a dramatic drop in rates anytime soon. So, for the foreseeable future, affordability is likely to remain a key issue for many aspiring homeowners.