Housing market activity remains weak

House prices remain unchanged in September, but remain down 5.3% year on year, Nationwide reports.

Nationwide’s House Price Index found that house prices in London declined by 3.8% year-on-year to £514,325 in the third quarter of 2023.

The South West was the weakest performing region, with prices down 6.3% year on year.

Challenging picture for housing affordability

Robert Gardner, Nationwide’s chief economist, said: “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, 30% below the monthly average prevailing in 2019 before the pandemic struck.

“This relatively subdued picture is not surprising given the more challenging picture for housing affordability.

“For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%.”

Ease some of the pressure

He added that lowering inflation will help ease the burden on those looking to buy and remortgage.

“However, investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening.

This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing .

“If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”

Toll on property market

Tom Bill, head of UK residential research at Knight Frank, said: “Fourteen consecutive rate rises have taken their toll on the property market but more stable lending conditions means buyers and sellers will be able to catch their breath.

“The number of people rolling off more favourable fixed-rate mortgages won’t fall in 2024, but sentiment should improve as volatility reduces.

“We think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”