Prices rose 0.7 per cent in September, taking the average price of a home to £184,723 from £183,898 in August.
FInd out how much you can borrow
However, the Nationwide House Price Index revealed annual price growth slowed to 9 per cent in September from 9.6 per cent – its lowest in almost a year.
Most of the slowdown in annual price inflation was down to the effect of recent Bank of England interest rate hikes, according to Nationwide’s Chief Economist, Fionnuala Earley.
She said: “Events of the past two months now appear to mark a clear turning point in the interest rate outlook.
“In early August, most observers were still predicting that the Monetary Policy Committee (MPC) would move to raise base rates to 6 per cent by November at the latest. However, sentiment has changed significantly as the potential adverse economic impact of the credit crunch has been acknowledged by the MPC.”
FInd a new mortgage deal
Credit is tightening for leveraged borrowers
Over the last year, borrowers who have wished to extend themselves to the limit have been able to do so relatively cheaply in comparison to more restrained borrowers.
While some lenders are still willing to extend loans with little or no deposit, such products are now more expensive, reflecting the extra risk involved.
The difference in rates available on 95 per cent loan-to-value ratio (LTV) fixed rate mortgages and their 75 per cent LTV equivalent soared in August.
The average market rate for a 95 per cent LTV 2-year fixed rate mortgage was 0.45 percentage points higher than the rate on a 75 per cent LTV equivalent in August, compared with only 0.29 percentage points in July and a low of 0.23 points in April.
Calculate your mortgage repayments here
Earley said: “The message from lenders is clearly that from now on, risk must have its price. As a result, highly leveraged borrowing will remain less attractive and lending volumes in this segment may decline.
The cooling of activity among stretched borrowers is something that most commentators have predicted for some time, given the affordability pressures that have built up from rising house prices, higher base rates and weak earnings growth. The tightening of credit conditions may indeed be the trigger that causes this long-awaited trend to emerge.”
Loading ...