House price recovery continues with third monthly increase: Nationwide

UK house prices rose by 0.2% in November, the third successive monthly increase, the latest Nationwide house price index shows.

The monthly rise resulted in an improvement in the annual rate of house price growth from -3.3% in October, to -2.0%. While this remains weak, it is the strongest outturn for nine months.

House prices remain 2% lower than November 2022.

Robert Gardner, Nationwide's chief economist, said: “There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity.

“In mid-August, investors had expected the Bank of England to raise rates to a peak of around 6% and lower them only modestly (to c.4%) over the next five years. By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead.

“These shifts are important as they have led to a decline in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing. If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels.

“While mortgage rates are unlikely to return to the lows prevailing in the aftermath of the pandemic, modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead.

“Nevertheless, a rapid rebound still appears unlikely. Cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, but consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries.

“Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high.

“Policymakers have cautioned that it is too early to be talking about interest rate cuts. Indeed, three of the nine members of the Bank of England’s Monetary Policy Committee voted to increase Bank Rate at its meeting in early November, though the remaining six preferred to hold at 5.25% for the time being.”

Nicky Stevenson, managing director at national estate agent Fine & Country, commented: “House prices rose slightly in November, underpinned by a pool of motivated buyers who are expressing additional confidence after the base rate plateaued.

“Mortgage approvals, an indicator of future sales, rose again in October to reach a three-month high, indicating that people are still eager to move home.

“Competition in the mortgage market is adding extra encouragement, which is creating a calmer property market in the final months of the year when combined with falling inflation and stable employment figures.

“We expect to see steady demand in the new year as people decide to renew their ambitions to move, and this should help to keep prices relatively stable.

“Although it remains important for sellers to price their property realistically, good quality homes in sought-after locations continue to attract strong demand.”

Jonathan Hopper, CEO of Garrington Property Finders, added: “All the property market wants for Christmas is stability – and on this evidence, it might just get it.

“The Nationwide’s data has shown average prices nudging upwards in each of the past three months and the quarterly rate of growth has now crept back into positive territory for the first time in over a year.

“But the progress is tentative and it’s too soon to talk of a recovery, let alone a rebound. The market remains highly polarised with wide variations depending on price point and location.
“We’re still seeing double-digit price reductions in some areas, but equally some property types are now selling much more quickly than they were six months ago.

“Even though more homes are coming onto the market, transaction volumes are still low. Official data shows the number of homes sold in October was down 21% on the same time last year, and buyers remain deeply price sensitive.

“However sentiment is improving and previously hesitant buyers are coming off the fence, encouraged by some positive news from the mortgage market. Many lenders have begun to trim their interest rates as expectations grow that the Bank of England Base Rate has peaked.

“Widespread falls in price mean that homes in many areas are better value than they were a year ago. This, combined with cheaper borrowing costs, should give the market a welcome lift as we enter the New Year – though price movements are likely to be gradual rather than dramatic in the months ahead."