House prices were up 0.7 per cent in October, pushing the average price of a home in the UK above a quarter of a million pounds (£250,311) for the first time.
This figure has climbed by £30,728 since the pandemic struck back in March 2020, according to Nationwide’s latest House Price Index published yesterday (November 3).
But prices are growing more slowly, with annual house price growth down by 0.1 percentage point, slipping marginally below double-digit territory.
Growth dipped from 10 per cent in September to 9.9 per cent in October, in line with predictions of a “gradual deflation” in house prices over the next few months.
Whilst prices continue to climb, the much-anticipated base rate rise - expected to be announced today - has led many in the industry to remain cautious over their house price growth predictions for the coming months.
“Whilst house price growth is continuing to exceed expectation, it may well start to stutter as inflation and potential interest rate rises could mean buyers begin to be more cautious in the months ahead,” said Miles Robinson, head of mortgages at online broker Trussle.
Today, the Bank of England will announce whether or not it has decided to raise the UK’s 0.1 per cent base rate in an effort to curb inflation.
Last month, the Office for Budget Responsibility said inflation could peak at close to 5 per cent next year, with economists fearing any imminent fall backs were “unrealistic”.
Robinson said house prices are “likely artificially high” due to the stamp duty holiday, which wound down in September.
“[House price] growth may taper off as buyers take stock in the coming months,” he said. “However, any correction in the market is likely to be slight as house prices are still underpinned by a lack of supply.”
Currently, the number of houses on the UK market is far outweighed by demand from UK buyers, due to delays in the housing supply chain. With no immediate remedy to this imbalance on the horizon, house prices are expected to remain high, even if growth stymies.
Jonathan Hopper, chief executive at Garrington Property Finders, said the “white heat of inflation” throughout much of this year is “still creating sleepless nights in Threadneedle Street” - home to England’s central bank.
He continued: “Money markets are increasingly bringing forward their predictions of rate rises but even if a string of small adjustments do happen, loss of price momentum is likely to still be gradual.
“In most areas it will be a case of things ‘calming down’ rather than ‘going down’.”
Rate of growth 'can't go on'
Whilst housing demand will remain high compared to supply going into next year, experts have said house price growth "can't go on".
Tomer Aboody, director of property lender MT Finance, said: "As we head towards a less stable position with an imminent interest rate rise, just as government support comes to an end, surely there will be a shift. This rate of growth simply can’t go on forever."
He added: "Demand for good houses with space will always be there as buyer sentiment has shifted since the pandemic, perhaps for good. But activity is likely to be less frantic than it has been as the market stabilises.'
In response to an anticipated base rate rise, lenders have been hiking up their interest rates, following the launch of some of the UK’s lowest mortgage rates ever just a few months earlier.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said this was a sign the market was already prepared for a raise.
“Mortgage applications remain robust even though all eyes are on the Monetary Policy Committee amid speculation there will be an interest rate rise,” Harris explained.
“The markets have already factored in at least one modest base rate rise, and a couple more by the end of 2022, with lenders raising their cheapest mortgage rates accordingly.”
The chief executive reckons even if there isn’t a base rate rise this month, it is “only a matter of time” before there is one.
But with most borrowers on fixed rates, Harris said the immediate impact should be “minimal”.
ruby.hinchliffe@ft.com
