MortgagesFeb 1 2023

House prices fall for fifth month in a row

Search sponsored by
House prices fall for fifth month in a row
Photographer: Chris Ratcliffe/BloombergHouses at a Taylor Wimpey Plc residential housing construction site in Hoo, UK, on Monday, Jan. 9, 2023

Annual house price growth slowed to 1.1 per cent across the UK in January, as the cooling of house prices continued for a fifth consecutive month.

This is a further fall from the 2.8 per cent annual growth reported in December, with prices now 3.2 per cent below the peak seen in August.

The average house in the UK had a value of £258,297 in January, down from £262,068 a month prior.

Despite the slowdown in house price growth and signs that mortgage rates are normalising, Nationwide chief economist, Robert Gardner said affordability still remains a significant barrier for potential homeowners.

Over the past year, this has been driven by the rise in the cost of servicing the typical mortgage as a result of the increase in mortgage rates.

“It is too early to tell whether activity in the housing market has started to recover. The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini Budget,” Gardner said.

“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.”

Gardner noted however that should recent reductions in mortgage rates continue this should “modestly” help the affordability prospects of potential buyers.

Likewise, income growth - which is currently running at 7 per cent in the private sector - and weak house price growth should also help. 

“Nevertheless, the overall affordability situation looks set to remain challenging in the near term. Saving for a deposit is proving a struggle for many given the rising cost of living, especially those in the private rented sector where rents have been rising at their strongest pace on record,” Gardner added.

Saving for a deposit remains a significant challenge for potential homeowners.

Nationwide estimates that it would take more than 15 years for someone on an average salary in London to save a 20 per cent deposit for the average first time buyer home. 

Gardner noted that all regions across the UK have seen a deterioration in affordability compared to 2021, with the cost of servicing the typical mortgage as a share of take-home pay now at or above the long-run average in all regions.