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UK house prices see biggest monthly fall in two years

Christina Hoghton
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Christina Hoghton

Higher mortgage rates and stretched affordability are beginning to push property prices down

UK house prices fell 1.4% between October and November, said Nationwide, the biggest fall since June 2020.

The average UK house price is now £263,788.

It follows a 0.9% drop in October, as the housing market slowdown continues.

Annual UK house price growth also slowed sharply, to 4.4% in November, from 7.2% in October, said the UK’s biggest building society.

Robert Gardner, Nationwide’s chief economist, said: “While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum. Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.

“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.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, added: “The carnage wrought by the mini-budget may have tipped the property market over the edge. The delay in sales being completed means this is just a first glimpse of the horrors that may lie ahead, and it’s looking like the next few months could be something of a nightmare.

“In theory, buyers always knew rates would rise, because they were already on their way up. However, the speed and scale of the hikes made them all-too aware of the risk. Meanwhile, fear spread that prices could be on their way down before long.”

Affordability constrained

Affordability was already becoming stretched across the UK, and the recent increases in mortgage rates have exacerbated the issue.

Nationwide analysed affordability across different regions by using income data to calculate where within the income distribution scale someone purchasing the typical first-time buyer property in each region would sit, assuming they had a 20% deposit and borrowed four times their income.

If the typical buyer is located higher in the income distribution it suggests affordability is more stretched, with more people priced out of the market.

Gardner explained: “The picture that emerges is that this hypothetical typical buyer is located further up the income spectrum as you go from the north to south of the country.

“For example, in Scotland and the North of England, this typical buyer would be in the 30th income percentile, while in the South West they would be in the 80th percentile, and above the 90th percentile in London and the South East.”