- House prices fell 0.2% month-on-month in September, and were up just 0.8% in a year (source: Annual house price growth halves in September | Nationwide)
- This is the slowest growth since last December and half the growth seen in August
- The average house price was £274,251
Sarah Coles, head of personal finance at AJ Bell, comments:
“The traditional autumn house price bounce fell flat in September, with prices falling during the month. This was so unusual for the time of the year that it meant the annual price rise actually halved. Prices are now growing at their slowest pace since December last year, and are significantly lagging inflation. It means property is losing value once inflation is taken into account.
“It’s easy to see why. Mortgage rates have been climbing since early August, forcing buyers to rethink their plans. They kept rising relentlessly through September too, so by the end of the month, average five-year fixed rates reached a three-year peak according to Moneyfacts.
“This has come despite the fact the Bank of England base rate has remained on hold. It’s due to the ongoing conflict in the Middle East. The fact there’s no end in sight means oil prices have ramped up. This has fuelled fears that inflation will be higher for longer and that the Bank will raise rates. This, in turn, has pushed bond yields up, and because bonds are used to price mortgages in the swaps market, it has made fixed rate deals more expensive. Fixed rate deals dominate the market, which means higher rates hit would-be buyers hard.
“House prices are still rising more slowly than wages, so they’re getting more affordable on paper. It’s just that, in reality, more expensive mortgage rates are pricing people out.
“The fact that property is now losing value after inflation could have a further dampening effect on buyer confidence, especially in parts of the country where property prices are actually falling. Over the past three months, we’ve seen price drops across the South West, East Anglia, East Midlands and outer London.
What can you do?
“Future movements are difficult to predict, because so much depends on what happens next in the Middle East, which is so uncertain. However, while you can’t control what’s happening in the wider world, you can control your own position. If you’re being forced to sit on your hands and wait for mortgage rates to improve, this is a great opportunity to put yourself in a better position to buy.
“If you’re trying to move up the property ladder, take a look at any work that needs to be done on your own home, and whether you now have the time and space to get that sorted before the move – so you’ll be more attractive to buyers when the property eventually goes up for sale. If you’re a first-time buyer, you may be able to top up your Lifetime ISA and get a bigger bonus from the government, as well as benefit from any investment growth while you continue to build up your pot to buy. Meanwhile, for anyone about to embark on this expensive process, it’s a useful time to beef up your emergency savings pot, so you can manage those first expensive months in a new property.”
