Nationwide says property prices are likely to fall further, with surveyors reporting that new buyer inquiries remain weak. Photograph: scenicireland.com/Christopher Hill Photographic/AlamyNationwide says property prices are likely to fall further, with surveyors reporting that new buyer inquiries remain weak. Photograph: scenicireland.com/Christopher Hill Photographic/AlamyUK house prices grow at slowest pace in two years as mortgage rates riseAverage price for property stands at £273,566 in October, flat on previous month, says Nationwide
UK house prices grew by an annual rate of just 0.5% in October, the slowest pace in more than two years, as higher mortgage rates put off potential buyers.
The average price for a property in the UK stood at £273,566 in October, flat on the previous month and down from 0.8% in the year to September, according to the lender Nationwide.
The slowdown in the market comes as buyers face higher borrowing costs. This month the average cost of a five-year fixed-rate mortgage hit the 6% barrier for the first time in three years.
What you need to know about Your First Home scheme for first-time buyersRead moreThe average stood at 5.99% on Thursday, according to the financial information provider Moneyfacts, while the average two-year rate was not far behind at 5.97%.
There has been no change in the Bank of England base rate since last December but volatility in the bond market has driven up the swap rates that influence the pricing of fixed-rate mortgages.
While the Bank of England has kept its key interest rate on hold at 3.75%, expectations are growing that next week the monetary policy committee will vote to increase the rate for the first time in three years to 4%.
Robert Gardner, the chief economist at Nationwide, said the Middle East conflict had fed concerns around inflation, driving up expectations of higher interest rates.
Property prices are likely to fall further, he said. “Surveyors report that new buyer inquiries remain weak.
“Consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead.”
Tom Bill, the head of UK residential research at Knight Frank, added that the impact of rising mortgage costs “eclipses any support measure announced in this week’s budget”.
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This week the chancellor, John Healey, confirmed the government’s new £4.7bn Your First Home scheme, which is designed to give a helping hand to first-time buyers who do not have access to the “bank of mum and dad”.
Bill added: “The absence of major shocks from the chancellor may produce a modest relief bounce in coming months. However, asking prices will need to reflect the much tougher financial landscape that buyers face.”
Rob Wood, the chief UK economist at the consultancy Pantheon Macroeconomics, said the government’s new scheme could provide a “modest boost” to the market but that prices were likely to remain subdued next year.
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