Annual house prices drop as Nationwide warns of slowing market

Annual house prices growth hit an 18-month low during October and fell on a monthly basis for the first time since July 2021, Nationwide claims.

The latest Nationwide House Price Index shows annual house price growth slowed from 9.5% in September to 7.2% in October.

Average values declined by 0.9% on a monthly basis to £268.282.

Robert Gardner, chief economist for Nationwide, said:

“October saw a sharp slowdown in annual house price growth.

“The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates. 

“Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”

He said the market looks set to slow in the coming quarters, adding:

“Inflation will remain high for some time yet and base rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures. 

“The outlook is extremely uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.”

Gardner highlighted that longer term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover. 

Gardner said:

“Given the weak growth outlook, labour market conditions are likely to soften, but they are starting from a robust position, with unemployment at near 50-year lows. 

“Moreover, household balance sheets appear in relatively good shape with significant protection from higher borrowing costs, at least for a period, with over 85% of mortgage balances on fixed interest rates. Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices.”

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