British annual house prices rose by less than expected in June, but softening expectations for interest rate hikes ​by the Bank of England are likely to improve affordability, according to mortgage lender ‌Nationwide.

House prices rose by an annual 2.2 per cent in June, below a 2.4 per cent rise forecast in a Reuters poll of economists. Prices were flat month-on-month, as expected, after a surprise ​0.6 per cent fall in May.

Mortgage costs have risen since the start of the Iran war ​at the end of February, tempering a strong start to 2026 ⁠for house price growth, and pushing up expectations the BoE would need to hike ​interest rates to curb inflation.

“It is not surprising that the market has softened a ​little in recent months, given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates,” Robert Gardner, Nationwide’s chief economist, said.

“If the energy ​shock continues to subside, the Bank of England may not need to raise interest ​rates, or at least by less than had previously been anticipated.”

The Bank of England has said that the number of mortgages approved by British lenders for house purchase fell by the most since December 2023 in May.

The central bank kept interest rates at 3.75 per cent in June and investors are pricing in the first quarter-point increase in the main Bank Rate in ​early 2027.

“If maintained, these ​trends will help ⁠to restore household confidence and ease affordability constraints, paving the way for a recovery in housing market activity in the coming ​quarters, providing that domestic political uncertainty does not adversely impact sentiment,” ​Gardner added.