There’s been a slowdown in the annual growth rate of house prices – a movement described as “modest” by the Nationwide.
The growth rate is 9.5 per cent, from 10 per cent in August, with 10 of the 13 regions recording slower annual price growth in the third quarter of the year. The south west was the strongest performing region once again, while London remained weakest.
Robert Gardner, Nationwide’s chief economist, says: “In September, annual house price growth slowed to single digits for the first time since October last year although, at 9.5 per cent, the pace of increase remained robust. Prices were unchanged over the month from August, after taking account of seasonal effects. This is the first month not to record a sequential rise since July 2021.
“There have been further signs of a slowdown in the market over the past month, with the number of mortgages approved for house purchase remaining below pre-pandemic levels and surveyors reporting a decline in new buyer enquiries. Nevertheless, the slowdown to date has been modest and, combined with a shortage of stock on the market, this has meant that price growth has remained firm.
“By lowering transaction costs, the reduction in stamp duty may provide some support to activity and prices, as will the strength of the labour market, assuming it persists, with the unemployment rate at its lowest level since the early 1970s.
“However, headwinds are growing stronger suggesting the market will slow further in the months ahead. High inflation is exerting significant pressure on household budgets with consumer confidence declining to all-time lows.
“Housing affordability is becoming more stretched. Deposit requirements remain a major barrier, with a 10% deposit on a typical first-time buyer property equivalent to almost 60% of annual gross earnings – an all-time high.
“Moreover, the significant increase in prices in recent years. together with the significant increase in mortgage rates since the start of the year. have pushed the typical mortgage payment as a share of take-home pay well above the long-run average.”
A prominent business analyst, Sarah Coles from the Hargreaves Lansdown consultancy, has a less generous take on the change.
She says: “House prices stalled, even before chaos erupted in the mortgage market, and we saw the first month in over a year without growth. This could be a sign of stormier times ahead for house prices.
“There were already gathering clouds in the property market, with surveyors saying fewer people were house hunting and buyers were losing confidence. In fact consumer confidence hit record lows. There was no real rush to buy, and mortgage approvals for purchases stuck below pre-pandemic levels.
“However, the storm broke … with around 40 per cent of mortgages being pulled from shelves, because the pace and scale of the collapse in the bond market meant it was impossible to sensibly price them. When the dust settles, and lenders come back to the market, we can expect eye-watering rises in interest rates.
“This needs to be seen in the context of how dramatic house price rises have been in recent years, and the fact that our bills have raced away too.
“Even if people are still keen to buy, they may no longer qualify for a mortgage on affordability terms. It’s difficult to see this as anything other than a sign of things to come, as these pressures raise the risks not only that price rises stagnate, but that they begin to fall. There is the chance that we could see a significant correction in the coming months.
“There’s still the possibility that strength of the labour market could help hold the market together. Meanwhile, the fall in stamp duty could help to close the affordability gap, and keep the market ticking over. It’s unlikely to stimulate a boom, but it could make a difference, particularly at the more affordable end of the market.”
