House price growth slows even further in November

House price growth slows even further in November

House price growth has seen its largest monthly fall in over two years as growth drops from 7.2 per cent in October to 4.4 per cent in November.

The latest house price index from Nationwide released today (December 1) showed a “sharp slowdown” in house price growth last month as brokers say the market should brace itself for falling house prices in the new year.

Nationwide’s chief economist, Robert Gardner, said the data shows that the fallout from the “mini” Budget continued to impact the market while affordability remained “stretched”.

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“While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum.

"Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation,” Gardner said.

“The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and [the] bank rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures,” he added.

Interest rates have slowly been decreasing over the past month as swap rates stabilised after the shock that was the “mini” Budget. 

For the residential market, the average five-year fixed rate fell below 6 per cent last week for the first time in seven weeks. 

While in the buy-to-let sector, as of November 25, the average two-year fixed rate across all loan-to-values sat at 6.50 per cent, an increase of 0.93 percentage points from October 1 when it sat at 5.57 per cent.

“The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible,” Gardner said.

As the cost of longer term borrowing begins to track down from its October peak, Gardner takes the view that this “may moderate further”. 

He also noted that although labour market conditions are likely to soften as a result of the weak growth outlook, they are starting from a “robust position” with unemployment still near a 50-year low.

“Moreover, household balance sheets remain in good shape with significant protection from higher borrowing costs, at least for a period, with around 85 per cent of mortgage balances on fixed interest rates. 

“Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices,” Gardner added.

Affordability in the mortgage market has been stretched, with considerable variation by region according to the HPI. 

Some regions have seen a more pronounced deterioration in affordability in recent years than others.

Wales has seen the biggest deterioration in affordability since 2019, however London remains the region that is most stretched.