The mortgage lender revealed today the average UK property is now £259,153, having fallen by 0.8% over the month to the end of August.
It comes following an annual dip in annual prices by 3.8% in July and after a tumultuous period of interest rate hikes.
Robert Gardner, chief economist at Nationwide, said the further softening in annual house prices seen in August was not surprising given the increase in mortgage prices recently.
In fact, these interest rate hikes had clearly impacted house purchases with Nationwide’s data showing home mover completions (with a mortgage) in the first half of 2023 were 33% lower than 2019 levels.
Meanwhile, first-time buyer numbers were around 25% lower and buy-to-let purchases involving a mortgage were nearly 30% below pre-pandemic levels.
But, by contrast, cash purchases increased by 2%.
Whilst a drop in house prices may seem like bad news, there is hope this may help those would-be buyers who have struggled with affordability.
Gardner added: “While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once Bank Rate peaks.”
Already, in the last few weeks, fixed mortgage rates have begun gradually to fall. Data from Moneyfactscompare shows the average two-year fixed rate mortgage is 6.70% today (Friday 1 September). This compares to 6.80% on the 11 August – exactly three weeks ago.
Charlotte Nixon, mortgage expert at Quilter, said: “There is no doubt that the housing market is under strain at the moment but this still may be a relatively minor blip.
“While on one hand, rising borrowing costs and the unpredictability of the global economy might be influencing this trend, on the other hand, the inherent human drive for homeownership, especially post-pandemic, remains strong and if stability can be found in the coming months and interest rates can stay relatively steady demand is likely to return especially given wage inflation has been so strong recently.
“However, bloated house prices have for a long time locked people out of the market and a small down turn does unlock the potential for enhanced housing affordability in the long run.
“Lower house prices, coupled with steady nominal income growth, might rekindle the hopes of first-time buyers. However, a potential tug-of-war between affordability and higher borrowing costs is on the horizon.”
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