Mortgages  

House price growth slows to single digits

House price growth slows to single digits
 

Annual house price growth has slowed in September, down from 10 per cent in August, to 9.5 per cent in September, according to the latest Nationwide House price index. 

This is the first time growth has been in the single digits since October last year, according to Nationwide chief economist Robert Gardner, but he said at 9.5 per cent, the pace of increase “remained robust”. 

After taking account of seasonal effects, prices were unchanged over the month from August. 

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“This is the first month not to record a sequential rise since July 2021,” Gardner said.

“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.”

Most regions in the UK experienced the slowdown, with Nationwide’s data for July to September showing a softening in growth in 10 of the UK’s 13 regions. 

The South West was the strongest performing region, with growth of 12.5 per cent, alhough this was down from 14.7 per cent in the previous quarter. 

The East Midlands were close behind with growth of 12.3 per cent, up from 11.4 per cent the previous quarter. 

In Wales, growth slowed to 12.1 per cent, but it remained the top performing nation. 

Price growth in Northern Ireland softened to 10.1 per cent, while in Scotland, there was a slowdown in annual growth to 7.8 per cent, compared with 9.5 per cent last quarter.

Gardner said the reduction in stamp duty announced in last week’s mini Budget may provide some support to activity and prices by lowering transaction costs, as will the strength in the labour market.

But he warned “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,” he said.

“Housing affordability is becoming more stretched. Deposit requirements remain a major barrier, with a 10 per cent deposit on a typical first-time buyer property equivalent to almost 60 per cent of annual gross earnings – an all-time high."

Moreover, he explained that the significant increase in prices in recent years, together with the increase in mortgage rates since the start of the year, have combined pushed the typical mortgage payment as a share of take-home pay "well above the long-run average".

Residential lender Glenhawk’s chief executive, Guy Harrington warned of “prolonged turmoil” for homeowners. 

“The decade long house price growth party is over,” he said. 

“If we do indeed see rates anywhere near the 6 per cent that the markets are pricing in, the only outcome is a housing market crash. The Bank of England’s misguided obsession with crushing inflation has left an overpriced housing market at the mercy of the banks.