UK house prices grow 0.5% in October, slowest in over two years as mortgage rates rise
Nationwide puts the average UK property price at £273,566, with five-year fixed mortgage rates hitting 6% for the first time in three years.
At a glance
- UK house prices rose 0.5% in the year to October, the slowest annual growth in more than two years, according to Nationwide.
- The average UK property price was £273,566 in October, unchanged from September, as five-year fixed mortgage rates hit 6%.
- The Bank of England is expected to consider raising its 3.75% base rate to 4% next week, which would be the first rise in three years.
UK house prices rose by just 0.5% in the year to October, the slowest annual pace in more than two years, as higher mortgage rates put off prospective buyers, according to the lender Nationwide.
The average UK property price stood at £273,566 in October, unchanged from the previous month and down from annual growth of 0.8% in the year to September.
Mortgage costs reach 6%
The cooling market reflects rising borrowing costs. The average five-year fixed-rate mortgage reached the 6% barrier this month for the first time in three years, standing at 5.99% on Thursday, according to the financial information provider Moneyfacts. The average two-year rate was close behind at 5.97%.
The Bank of England has not changed its base rate since last December, holding it at 3.75%, but volatility in the bond market has pushed up the swap rates that influence fixed-rate mortgage pricing. Expectations are growing that the monetary policy committee will vote next week to raise the rate to 4%, which would be the first increase in three years.
Robert Gardner, Nationwide's chief economist, said the Middle East conflict had fed concerns around inflation, driving up expectations of higher interest rates. He said property prices are likely to fall further. "Surveyors report that new buyer inquiries remain weak," he said, adding that consumer sentiment dipped noticeably in October, with households less confident about the wider economy and their own finances.
Budget support 'eclipsed'
Tom Bill, head of UK residential research at Knight Frank, said the impact of rising mortgage costs "eclipses any support measure announced in this week's budget".
This week the chancellor, John Healey, confirmed the government's new £4.7bn Your First Home scheme, designed to help first-time buyers who do not have access to the "bank of mum and dad".
Bill said the absence of major shocks from the chancellor could produce a modest relief bounce in the coming months, but that asking prices would need to reflect the much tougher financial landscape buyers now face.
Rob Wood, chief UK economist at the consultancy Pantheon Macroeconomics, said the new scheme could provide a "modest boost" but that prices were likely to remain subdued next year.
Source: The Guardian Business.
Questions and answers
- Why are UK house prices slowing down?
- Higher mortgage rates have deterred potential buyers. The average five-year fixed rate hit 6% this month for the first time in three years, and Nationwide said surveyors report weak new buyer inquiries.
- What is the government's Your First Home scheme?
- It is a £4.7bn scheme confirmed this week by the chancellor, John Healey, aimed at helping first-time buyers who do not have access to the "bank of mum and dad".
- Will UK house prices fall further?
- Nationwide's chief economist Robert Gardner said prices are likely to fall further, while Pantheon Macroeconomics expects them to remain subdued next year.
