Over the year to October the average UK property increased in value by 7.2% which compares to the 9.5% rise experienced in September, according to the data from the Nationwide House Price Index.
This, said the mortgage lender, was the first monthly fall in prices since July 2021 and the largest since June 2020. It means the average UK property is now £268,282.
Robert Gardner, Nationwide’s chief economist, said: “The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates.
“Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”
He thought the market was set to slow further in the next few months and that inflation would also remain high for ‘some time yet’.
“The outlook is extremely uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible,” he added.
What’s the outlook for mortgage rates and house prices?
Those working in the property and mortgage market were also hopeful of the ‘soft landing’. Sofia Jones, managing director mortgage broker, Penny House thought it may be possible. She said: “Few will be surprised at the sharp slowdown in annual price growth in October.
“Over the past five to six weeks, since the now-infamous mini-Budget, demand from buyers understandably dropped off a cliff as mortgage rates shot up and political turmoil rose to Alpine heights.”
She added “We’re predicting a busier November and December as buyers who held off in October amid the chaos decide to move forward with their purchases, as they see lenders reducing their fixed rate deals across the board.”
However, Emma Cox, MD of Real Estate at Shawbrook, was not so sure. She said: “Although prices remain high and the current economic uncertainty continues to make the housing market tricky to navigate, rising mortgage rates are likely to contribute to a cooling of house price growth in the coming months.”
She added: “Buyers will have to shop around and really consider their options in order to secure the right mortgage for them in the current climate. However, some potential buyers may hold off in the short-term to see if a cooling does come into effect.”
Stamp duty cuts
Meanwhile, Karen Noye, mortgage expert at Quilter, said the stamp duty cut – one of the few policies from the mini-Budget to remain in place – should also be taken into consideration when attempting to assess what might happen to house prices.
She added: “If this continues the size of the house price drop might be lower as more people still opt to take advantage of this tax saving despite the economic backdrop.
“Similarly, the UK suffers from a serious lack of housing stock. This pumps up demand because there is so little available. This once again could make any house price fall softer.”
