House Prices Experience 5.3% Drop | Nationwide Report
According to Nationwide’s latest house price index, house prices in the UK fell by 5.3% in the year to September, equivalent to approximately £14,500. This decline has been attributed to the increase in mortgage rates, resulting in reduced affordability for potential buyers and movers. The drop marks the fastest rate of decline since 2009.
In August, average prices remained unchanged compared to September at a 5.3% annual decrease. However, the 0% growth recorded for September improved upon the 0.8% fall in the previous month. The average house price in Britain currently stands at £257,808, slightly lower than £259,153 recorded in August.
The reason the £1,345 drop is not classified as a fall is due to seasonal adjustments made to account for factors affecting the housing market at different times of the year. All regions in the UK experienced price drops over the past year, with the South West seeing the largest decline at 6.3%, whereas Northern Ireland remained the best performing region with a 1.8% fall.
Nationwide’s chief economist, Robert Gardner, mentioned that higher mortgage rates were driving down the number of mortgages being taken out. He stated, “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, around 30% below the monthly average in 2019 pre-pandemic.”
The affordability challenge in the housing market can be demonstrated by the example of someone earning an average income, purchasing a typical first-time buyer home with a 20% deposit. This individual would spend 38% of their take-home pay on their monthly mortgage payment, significantly higher than the long-run average of 29%.
While house prices staying flat in September was a positive surprise, property experts do not anticipate an end to the decline. Andrew Wishart, an analyst at Capital Economics, commented, “The stabilisation of house prices in September was a surprise given mortgage rates are still well above the level which allowed the first leg down in house prices to bottom out. But leading indicators of house prices remain downbeat, so we suspect house price falls will resume in the coming months.”
Flats witnessed the largest year-on-year price decrease in September, at 5.7% compared to detached houses at 3.6%, semi-detached houses at 4.6%, and terraced properties at 5.3%. Despite this, flats have seen less price growth during the pandemic property boom, with only a 12% increase compared to the 24% surge in detached properties. Nationwide states that the more affordable price point of flats is attracting stretched buyers, resulting in a higher number of flat sales compared to other types of homes.
What to do if you need a mortgage
Borrowers needing a new mortgage or remortgaging should explore their options promptly. This is Money’s best mortgage rates calculator, powered by L&C, can assist in finding deals that match mortgage requirements.
Remortgaging
Borrowers considering remortgaging should compare rates and consult a mortgage broker. Fixing into a new deal may be a suitable option for those with a fixed-rate deal ending within the next six to nine months. Adding arrangement fees to the loan allows borrowers to secure a rate without incurring high costs upfront.
Home Purchase
Homebuyers with agreed purchases should aim to secure rates as soon as possible to have a clear understanding of their monthly payments. It is crucial to exercise caution and be prepared for the possibility of house price drops from the current high levels due to increased mortgage rates limiting borrowing abilities.
To effectively compare mortgage costs and find the right deal, it is advisable to consult a reputable mortgage broker. The best fixed-rate mortgages can be found using our mortgage rates calculator, considering factors such as home value, mortgage size, term, and fixed-rate requirements.
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