In the year leading up to September, the United Kingdom witnessed a 5.3% decrease in property prices, affecting every region, as per the data revealed by Nationwide, the UK's largest building society. Amidst rising interest rates exerting pressure on the market, the house price index indicated that seasonally adjusted prices remained stagnant in September, following a 0.8% dip in August.

The average home price in September stood at £257,808, a reduction of nearly £14,500 compared to the previous year. The housing market in the UK has decelerated recently due to the Bank of England's significant interest rate hikes, aimed at curbing inflation induced by the pandemic's disruptions and the Ukraine crisis, which triggered a surge in energy costs.

The Bank's response consisted of a series of interest rate hikes, unbroken until the previous month. In a noteworthy development, the Bank's monetary policy committee maintained rates unchanged during its September meeting, raising hopes of an end to further increases in borrowing costs.

However, the impact of these rate hikes continues to be felt in the housing market. According to the latest Bank of England data, only 45,400 mortgages were approved for house purchases in August, roughly 30% below the monthly average in 2019 before the pandemic's onset and the subsequent period of housing market volatility.

Robert Gardner, Nationwide's chief economist, commented, "This relatively subdued outlook comes as no surprise given the increasingly challenging housing affordability landscape. For instance, an individual with an average income purchasing a typical first-time buyer home with a 20% deposit would allocate 38% of their take-home pay to their monthly mortgage payment, substantially exceeding the long-term average of 29%."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted the "severe hit to affordability from higher mortgage rates" but suggested that recent improvements in consumer confidence might stimulate demand in the coming months after a brief downturn.

Gardner acknowledged that the Bank's pause had contributed to a decline in longer-term interest rates, potentially alleviating mortgage prices. However, he emphasised that the prospect of returning to the historically low rates seen before the pandemic remained distant.

Looking ahead, Gardner anticipated that the housing market would remain "relatively subdued" in the upcoming months, following price declines in every region during the third quarter of 2023 (July to September). The most significant drop occurred in the South-West of England, with a 6.3% decrease in prices, while six out of thirteen regions experienced declines exceeding 5%. The smallest decline was observed in Northern Ireland, where prices decreased by 1.8%.

[Source: The Guardian]