UK house price growth hits near three-year low as mortgage costs bite

UK house prices rose at their slowest annual rate in almost three years in October, an index has found.

Nationwide Building Society, which compiles the index, put annual growth at 0.5 per cent for the month, down from 0.8 per cent in September. It was the weakest reading since January 2024.

Month on month, prices did not move at all, leaving the average UK property worth £273,566 in October. The building society pointed to borrower caution, with mortgage costs having increased.

Robert Gardner, Nationwide’s chief economist, linked the higher mortgage costs to expectations of upcoming interest rate rises, as policymakers look to cool rising inflation caused by the Iran war.

He said: “Market activity and house price growth have slowed in recent months, in part reflecting the uncertain economic backdrop.

“Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices, fanning inflation concerns.

“This in turn has led to mounting financial market expectations of bank rate increases, which have maintained upward pressure on the market interest rates which underpin mortgage pricing.”

Mr Gardner said the property market was expected to remain under pressure, but should recover once the energy price shock fades.

He said: “Forward-looking indicators suggest further softness in the near term.

“Surveyors report that new buyer inquiries remain weak.

“Moreover, consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead.

“Once the energy shock fades, there are good reasons to believe the market will regain momentum.”

Zoopla recently reported that more than a third of homes in the UK are estimated to be in postcode areas where property values have fallen over the past year.

The proportion (35 per cent) has increased from 12 per cent a year ago, the property website said.

Price falls were found to be concentrated in London and the South East of England.

Higher mortgage rates have increased the cost of buying, with buyers also being more selective, with the number of homes for sale 7 per cent higher than last year, giving buyers more choice and room to negotiate, Zoopla said.

This is also putting pressure on sellers to price their properties competitively, to attract buyer interest, it added.

Despite a significant number of postcode areas seeing house price falls, the average house price across the UK is still 0.8 per cent higher than a year earlier, at £273,100, Zoopla said.

At a more localised level, 85% of homes in London and the South East were estimated by Zoopla to be in postcode areas with price falls.

There are still areas where home values are rising by more than 3 per cent annually, particularly across the North West and Scotland, Zoopla said.

It said house prices are rising by more than 4 per cent annually in postcode areas in Liverpool, Carlisle and Kilmarnock.