House prices in Oxford dropped in June, according to the newest figures.

And a sharp increase in borrowing costs is likely to exert a “significant drag” on housing market activity – according to Nationwide.

The building society has published the annual house price increases or decreases across the UK.

They show the average cost of a property in Oxford this month is £335,775 down 3.7 per cent across the three months to June.

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Nationally house prices were fairly stable over the month, falling by 3.5 per cent, reversing a 3.4 per cent annual decline in May, Nationwide Building Society said.

The average UK house price in June was £262,239.

Robert Gardner, Nationwide’s chief economist, said: “Longer term interest rates, which underpin mortgage pricing, have increased sharply in recent months, in response to data indicating that underlying inflation in the UK economy is not moderating as fast as expected.

“This has prompted investors to expect the Bank of England to increase its policy rate further and for it to remain higher for longer.

“Longer term borrowing costs have risen to levels similar to those prevailing in the wake of the mini-budget last year, but this has yet to have the same negative impact on sentiment.

“For example, the number of mortgage applications has not yet declined and indicators of consumer confidence have continued to improve, though they remain below long run averages.

“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term.”

A 10 per cent deposit on a typical first-time buyer home is equal to around 55 per cent of gross annual income, Nationwide said.

It added that, while this is down from the highs of 59 per cent prevailing in late 2022, it is marginally above the levels prevailing before the financial crisis struck in 2007/8.

Mr Gardner added: “Moreover, despite the higher interest rates available to savers, the sharp rise in rents, together with continued high rates of inflation more generally is continuing to make it difficult for many prospective buyers to save for a deposit.”

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He said: “A combination of healthy rates of income growth and modest price declines should improve affordability over time, especially if mortgage rates moderate.”

Mr Gardner said that for people coming off two-year fixed-rate mortgage deals, a new two-year deal could equate to an increase of £385 per month for a typical borrower.

Those coming off five-year deals face an increase equating to around £315 per month for a typical mortgage borrower, he said.

He said lenders will work with borrowers to provide assistance wherever possible.