Nationwide HPI shows annual growth softening to 0.5% 

Higher mortgage rates are continuing to impact buyer demand and therefore house prices, with Nationwide’s latest House Price Index showing a softening in UK annual price growth to 0.5% in October, the slowest growth since January 2024 and down from 0.8% in September. House prices remained unchanged month-on-month.

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.”

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, agreed: “Mortgage rates have risen far faster than anyone expected since the spring, and buyers have changed how they behave. People are choosing to borrow less and are cautious about moving,” she said.

Nervousness of an interest rate rise

There are also fears of what lies ahead, especially with the MPC meeting later this week. “With a rate rise expected, fixed-rate mortgages are unlikely to fall before Christmas, so December will be even quieter than usual,” she continued.

Meanwhile, Tom Bill, head of UK residential research at Knight Frank, said measures announced in the budget weren’t enough to stimulate the market. “With both main house price indices hovering around zero and mortgage approvals down by almost a fifth versus last year, the toll of the Middle East conflict on the UK housing market is more obvious with each passing month.

“The impact of rising mortgage costs eclipses any support measure announced in this week’s Budget, although the absence of major shocks from the Chancellor may produce a modest relief bounce in coming months. However, asking prices will need to reflect the much tougher financial landscape that buyers face.”

Gardner said that 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.

However, he said 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,” he said.