Modest UK house price growth in OctoberMake Text Bigger
Annual house price growth remained subdued at 0.4% while October saw a modest 0.2% rise month-on-month, after taking account of seasonal factors.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“Annual house price growth remained below 1% for the 11th month in a row in October, at 0.4%. Average prices rose by around £800 over the last 12 months, a significant slowing compared with recent years – for example, in the same period to October 2016, prices increased by £9,100.
“Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty. To date, the slowdown has centred on business investment, while household spending has been more resilient.
Offsetting forces keep housing activity stable
“The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years.
“Solid labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook. The question is whether this pattern will continue.
“There were tentative signs of a softening in the jobs market in the three months to August, as employment fell, unemployment rose, and wage growth slowed a little. If this trend continues it would be a significant concern, as the labour market has been the key factor underpinning the resilience of the household sector in recent years.
“However, monthly data is often volatile and the unemployment rate remains close to 40 year lows and real earnings growth (i.e. after taking account of inflation) is close to levels prevailing before the financial crisis.
“If Brexit uncertainty lifts in the months ahead, hiring is likely to recover, although there may be some upward pressure on mortgage rates as investors once again contemplate the potential for UK rate increases in the years ahead. However, in the near term such increases are likely to be capped by trends in global financial markets. Weak global economic prospects continue to exert downward pressure on long-term interest rates around the world – including the UK.
“Moreover, mortgage rates remain close to all-time lows – more than 95% of borrowers have opted for fixed rate deals in recent quarters, around half of which have opted to fix for five years.”
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