House prices fell in August by 0.1% meaning the value of a typical property in the UK is currently £271,079, according to Nationwide.
The mortgage lender’s monthly property price index revealed over the last year house prices have grown by 2.1% – which is down on the 2.4% growth in July.
Robert Gardner, chief economist at Nationwide, said the subdued pace of house price growth was understandable, given that affordability remains stretched relative to long-term norms.
“House prices,” he said, “are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many.
“Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.”
Nationwide’s data comes as the Bank of England revealed mortgage approvals for house purchases increased by 800 to 65,400 in July. Meanwhile, the number of people remortgaging to a new lender fell and the amount being borrowed on mortgages in total also reduced.
Ian Futcher, financial planner at Quilter, said this underscored the ongoing challenges facing the housing market.
“The lingering impact of stamp duty threshold changes,” he said, “coupled with persistent affordability concerns and the usual summer slowdown, continue to weigh heavily on activity.”
However, this could also provide opportunities for buyers – especially those who are stepping onto the property ladder.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “With house price growth subdued and listings on the rise, particularly from second homeowners and landlords looking to exit, buyers may find lucrative opportunities in the months ahead, especially if sellers continue to price competitively.”
Indeed, Nationwide’s Robert Gardner was positive about the coming months. “Affordability should continue to improve gradually if income growth continues to outpace house price growth as we expect,” he said.
“Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.”
