Annual house price growth slows further in October: Nationwide

October saw a further slowing in UK annual house price growth to 0.5%, from 0.8% in September, the latest Nationwide house price index shows.

September's annual figure means house prices are rising at their slowest pace since January 2024.

Prices were flat month-on-month, after taking account of seasonal factors.

Robert Gardner, Nationwide’s chief economist, said: “Market activity and house price growth have slowed in recent months, in part reflecting the uncertain economic backdrop. Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices, fanning inflation concerns.

“This in turn has led to mounting financial market expectations of Bank Rate increases, which have maintained upward pressure on the market interest rates which underpin mortgage pricing.
Where next?

“Forward-looking indicators suggest further softness in the near term. Surveyors report that new buyer enquiries remain weak. Moreover, consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead.

“Once the energy shock fades, there are good reasons to believe the market will regain momentum. The broader economy has proven surprisingly resilient to date, with annual economic growth accelerating in recent quarters. Employment is holding up well, as are real incomes, while household balance sheets are solid, with debt levels still close to 20-year lows relative to household disposable income.

“Moreover, the improvement in housing affordability seen over the past two years has been only partially unwound as a result of higher market interest rates, as income growth has continued to outpace house price growth by a wide margin."

Karen Noye, mortgage expert at Quilter, commented: "This morning’s Nationwide House Price Index reveals a housing market that continues to tread water, with annual price growth slowing to 0.5% in October, following no growth in the month and the average house price at £273,566. While demand for homes remains, stretched affordability and relatively expensive mortgages continue to limit how far buyers can go.

“The Budget had loomed large over the housing market in recent months and buyers and sellers now have greater clarity over the direction of government policy. However, that clarity comes with some significant changes for the housing market. The further two percentage point increase in property income tax from April 2027 will add to the pressures already facing landlords. That could further dampen appetite among buy-to-let investors and, over time, risks reducing the supply of rental properties if more landlords decide the sums no longer stack up.

“At the other end of the market, the new Your First Home scheme should provide a welcome helping hand to aspiring homeowners. A 20% equity loan, interest-free for five years, alongside a minimum deposit of just 2.5%, could bring home ownership within reach for buyers who can afford monthly mortgage payments but have struggled to build a sufficiently large deposit.

“However, government support can only do so much. Mortgage affordability remains the biggest piece of the puzzle. Buyers are still highly sensitive to monthly costs and, until borrowing becomes meaningfully cheaper, the housing market is likely to remain relatively subdued.

“The Budget therefore creates an interesting push and pull in the housing market. The government is giving first-time buyers a significant leg-up while simultaneously increasing the tax burden on landlords. How those measures feed through to prices, supply and demand will take time to become clear, but in the near term mortgage rates and household affordability are still likely to dictate the pace of the market.”

Jason Tebb, president of OnTheMarket, added: “The continued softening in annual house price growth suggests needs-based buyers proceeding with their moves are price sensitive and negotiating hard. 

"Market resilience is still evident, despite wider geopolitical issues creating uncertainty, along with higher mortgage costs. The Bank of England’s decision to hold interest rates throughout this year has helped affordability and confidence, but there are fears that rising inflation may finally force its hand at next week’s meeting, with the first rate rise this year.

"The Budget delivered targeted support for first-time buyers but there wasn’t much else of consequence to really boost activity in the market. That said, softening prices should assist with housing affordability as income growth continues to outpace house-price growth, which in turn could boost momentum as we move into the spring."