Annual house price growth fell from 7.2% in October to 4.4% in November, indicating that it’s normalising after months of extreme growth, Nationwide’s house price index has revealed.
On a monthly basis prices fell by 1.4% month-on-month, the biggest fall since 2020, while that followed a 0.9% drop in October.
It seems the cost-of-living crisis, combined with rising mortgage rates, is having a rapid cooling effect on the UK housing market.
Tomer Aboody, director of property lender MT Finance, said: “With the full impact of the Kwasi Kwarteng Budget being felt, the fall in prices isn’t surprising as markets reacted sharply, resulting in higher mortgage rates and lack of confidence.
“As the market continues to stabilise since Rishi Sunak took over, we should see a steadier picture going forward.
“With buyers stretched when it comes to affordability, the government needs to assist in helping banks be more flexible in their lending and helping buyers continue to move. Could the government potentially help by writing off some mortgage payments against tax for example?”
Typical house prices currently stand at £263,788, dropping from £268,282 in October.
Robert Gardner, Nationwide’s chief economist, said: “The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and Bank 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 uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.
“Longer term borrowing costs have fallen back in recent weeks and may moderate further, especially if investors continue to revise down their expectations for the future path of Bank Rate. Given the weak growth outlook, labour market conditions are likely to soften, but they are starting from a robust position with unemployment still near 50-year lows.
“Moreover, household balance sheets remain in good shape with significant protection from higher borrowing costs, at least for a period, with around 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.”
Marc von Grundherr, director of Benham and Reeves, talked up London’s ability to mitigate the impact of the slowdown.
He said: “Further market slowdown is to be expected as a consequence of recent political errors, ongoing economic uncertainty, and the cost of living crisis.
“A gradual reduction in the rate of house price growth should be welcomed, as this will help the market steadily return to pre-pandemic norms rather than falling off a cliff edge. First time buyers will surely be rubbing their hands.
“In many ways London is well-positioned to absorb the slowdown as house price growth has been more subdued in the capital, while Londoners are also better placed to financially stomach the trickier economic landscape we will be faced with next year.”
