Annual house price growth slows to weakest since January 2024

The rate of annual house price growth has slowed to its weakest pace for nearly three years amid borrower caution because of rising mortgage costs, according to an index.

Nationwide Building Society said UK property values grew by 0.5% in October, down from 0.8% in September and the slowest growth since January 2024.

On a month-on-month basis, prices remained unchanged, against a downwardly-revised fall of 0.3% in September, with the average property across the UK standing at £273,566 in October.

Robert Gardner, Nationwide’s chief economist, said it comes as mortgage costs have increased because of 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.”

He 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.”

Nationwide said property values grew 0.5% in October (PA)

PA Wire

Experts at Pantheon Macroeconomics said October’s house price index was not as bad as it could be, given market pressures.

They said: “Nationwide-measured house prices holding unchanged in October is a decent result in our view, given the context of high energy prices and expectations of multiple hikes from the Monetary Policy Committee.

“But September’s data were revised down, and the latest surge in oil and gas prices will take time to feed into activity, so a drop in prices in November is a good bet.”

They said the Government’s new “first home” scheme “will provide a modest boost to the housing market”.

“But the drag from elevated borrowing costs will be prolonged,” they cautioned.

Figures also out on Friday from HM Revenue & Customs (HMRC) showed residential sales transactions were 4% lower in September than a year earlier, at 94,800.

On a month-on-month basis, this was a fall of less than 1%, HMRC said.

Ian Futcher, financial planner at Quilter, said: “These figures show a housing market that was losing some momentum even before the measures announced in this week’s Budget.

“The Government’s new Your First Home scheme could provide valuable support for some first-time buyers by reducing the size of the deposit they need to find.

“However, its focus on new-build properties means it will not solve the wider affordability problem, while stimulating demand without a corresponding increase in supply could place upward pressure on prices.”