House prices stalled even before mortgage chaos hit: Nationwide

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the publication of the Nationwide House Price Index for September, showing house prices stalled even before mortgage chaos hit.

Key points from publication:

• The Nationwide House Price Index showed house price growth slowed to 9.5% in September – down from 10% in August. There was no growth recorded at all in September.
• This is the first time it has been in single figures since last October, and the first month without a rise since last July.
• Ten of the 13 regions of the UK saw slower growth between July and September than in the spring.
• The South-West saw the most growth again, while London saw the least.

Sarah Coles says:

“House prices stalled, even before chaos erupted in the mortgage market this week, and we saw the first month in over a year without growth. This could be a sign of stormier times ahead for house prices.

“There were already gathering clouds in the property market, with surveyors saying fewer people were house-hunting and buyers were losing confidence. In fact, consumer confidence hit record lows. There was no real rush to buy, and mortgage approvals for purchases stuck below pre-pandemic levels.

“However, the storm broke this week, with around 40% of mortgages being pulled from shelves, because the pace and scale of the collapse in the bond market meant it was impossible to sensibly price them. When the dust settles, and lenders come back to the market, we can expect eye-watering rises in interest rates. 

“This needs to be seen in the context of how dramatic house price rises have been in recent years, and the fact that our bills have raced away too. Even if people are still keen to buy, they may no longer qualify for a mortgage on affordability terms.

“It’s difficult to see this as anything other than a sign of things to come, as these pressures raise the risks not only that price rises stagnate, but that they begin to fall. There is the chance that we could see a significant correction in the coming months.

“There’s still the possibility that strength of the labour market could help hold the market together. Meanwhile, the fall in stamp duty could help to close the affordability gap and keep the market ticking over. It’s unlikely to stimulate a boom, but it could make a difference, particularly at the more affordable end of the market.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay