House prices down two per cent compared to year ago

House prices down two per cent compared to year ago
Christina Hoghton
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Christina Hoghton

Despite the dip, shifting rate expectations have led to cautious optimism on the housing market.

UK house prices rose 0.2 per cent month on month in November on a sesaonally adjusted basis, said Nationwide.

The building society noted in its latest House Price Index that prices were still down by two per cent over the year to hit £258,557 last month.

It said that, while prices remain weak, they were now at their stongest level in November since February.

Robert Gardner, Nationwide’s chief economist, said: “This was the third successive monthly increase and resulted in an improvement in the annual rate of house price growth from -3.3 per cent in October.”

Rate expectations

He added that the shift in interest rate expectations was easing affordability pressures.

“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,” Gardner explained.

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

Alice Haine, personal finance analyst at Bestinvest, added: “Challenges remain for the market as 2023 draws to a close.

“Mortgage approvals may have jumped up in October as buyers returned to the market buoyed by softening prices and an easing affordability crunch, but overall mortgage lending remains subdued – indicating that smaller, cheaper homes may now be favoured over larger, more expensive properties – and discounts are ramping up.

“Negotiating hard on price will become key for those hoping to nab a bargain, with homebuyers knocking off £18,000 on average from asking prices in November to land a deal – the highest average discount in five years indicating that buyers have the upper hand despite the long-term shortage of homes.”

Rates remain the issue

Sarah Coles, head of personal finance at Hargreaves Lansdown, said that ‘life remains tough for sellers’.

She explained: “Mortgage rates are the issue here. They have fallen notably from the peak in the summer, with the average five-year rate now closing in on 5.5 per cent and the two-year rate only fractionally over 6 per cent .

“However, they’re still higher than they were in the spring, and on another level to the rock bottom rates we had become so used to. They’re expected to keep drifting south, but we’re not likely to see a step change until interest rate cuts are priced in, and right now those cuts are forecast a long way down the track.

“The slight easing in mortgage rates in recent months has meant a small pick-up in mortgage approvals for purchases on October, which could bring some relief in the coming months. But it’s not likely to be a turning point for the market, because approvals still remain well below pre-pandemic levels.”