UK House Price Growth Slows to Weakest Pace in Two Years
Nationwide says the average UK home cost £273,566 in October, flat on the month. Buyers face higher mortgage rates.
UK house prices grew at the slowest pace in two years in October, according to the lender Nationwide. The slowdown comes as buyers face higher borrowing costs.
The average property price stood at £273,566, unchanged from September. Annual growth was 0.8% in the year to September.
Mortgage rates hit 6%
Borrowing costs have climbed this month. The average five-year fixed-rate mortgage reached 6% for the first time in three years. Moneyfacts put the average at 5.99% on Thursday, with the average two-year rate close behind at 5.97%.
The Bank of England has held its base rate at 3.75% and has made no change since last December. Bond market volatility has pushed up the swap rates that shape the pricing of fixed-rate mortgages. Expectations are growing that the Monetary Policy Committee will vote next week to raise the rate to 4%, which would be the first increase in three years.
Robert Gardner, Nationwide's chief economist, said the conflict in the Middle East has fed inflation concerns and raised expectations of higher interest rates. He said property prices are likely to fall further. "Surveyors report that new buyer inquiries remain weak," he said. "Consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead."
Budget measures
This week the chancellor, John Healey, confirmed a new £4.7bn Your First Home scheme. It is designed to help first-time buyers who cannot rely on the "bank of mum and dad".
Tom Bill, head of UK residential research at Knight Frank, said the impact of rising mortgage costs "eclipses any support measure announced in this week's budget". He added that the absence of major shocks from the chancellor may bring a modest relief bounce in coming months, but that asking prices will need to reflect a much tougher financial landscape for buyers.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the scheme could give the market a modest boost. He expects prices to remain subdued next year.
Source: The Guardian