UK house price growth stabilized in September, with a steeper slowdown expected in the coming months as the combination of soaring inflation and mortgage rates make the move unaffordable for many .
The latest snapshot from building society Nationwide comes at the end of a torrid week for the housing industry as lenders pulled 40% of available mortgages off the market following Kwasi Kwarteng’s mini-budget last Friday.
Lenders began to suspend proceeds after the Chancellor’s sweeping tax cut plans sparked a sell-off in financial markets and sparked expectations of higher interest rates. The volatility has made it increasingly difficult for lenders to price transactions.
A typical UK house cost £272,259 in September, a zero increase on the previous month and the first time property prices have not risen month-on-month since July this year latest, according to Nationwide.
Annual price growth fell to 9.5% this month, the first time house price growth has slowed to single digits since last October.
Overall, 10 of the 13 UK regions saw slower annual price growth in the third quarter of the year due to the slowdown in the housing market. The only regions to show an increase in annual house prices in September were the East Midlands, West Midlands and London.
“Headwinds are building, suggesting the market will slow further in the months ahead,” said Robert Gardner, Nationwide’s chief economist. “High inflation is putting significant pressure on household budgets, with consumer confidence falling to historic lows. Housing affordability is increasingly strained.
Gardner said a 10% down payment on a typical first-time buyer’s property now equates to almost 60% of annual gross income – an all-time high.
Some commentators expect UK house prices to fall by at least 10% next year as the economy slides deeper into recession and mortgage rates rise sharply, making relocations unaffordable for many.
“As interest rates rise and lenders adjust their affordability calculations, buyers who have yet to find a property may face a shift in what they can afford,” said Matthew Thompson, sales manager at Chesterton.
“As a result, many house hunters will need to revise their initial budget, with rising utility costs playing another important factor to consider. Many house hunters in London will see no choice but to make compromise on location and property size.