According to the latest annual house price index from Nationwide Building Society, house price growth slowed to just 7.2% in October down from 9.5 % in September in addition house prices fell by 0.9% month-on-month following former Liz Truss’ mini-budget.
This represents the first house price fall since July 2021 and the largest since June 2020. The average house price has also fallen from an average £272,259 in September 2022 to £268,282 in October 2022.
The Chief Economist at Nationwide has reported that the property market has been impacted by the mini-Budget, which led to an interest in interest rates. This resulted in issues with affordability for many people who hoped to either move home or purchase their first property at a time when the cost of living meant that finances were already under immense pressure.
The interest rate rise has meant that first-time buyers earning an average wage with a 20% deposit would see their monthly payments rise from 34% of their take-home pay to 45% based on a 5.5% interest rate. Inflation looks set to remain high for the time being, making goods and services more expensive when our bills are already increasing, and anyone on a variable-rate mortgage or about to end their fixed-rate will be under financial stress.
Despite these challenges, there is still demand for property, and the current supply level isn’t meeting this. This will prevent a market crash as house prices continue to increase throughout the rest of the year, although at a slower pace.
Should you buy now?
The property market is at an all-time high, and there are still buyers looking for new homes, especially as some buyers have mortgage offers at a preferable rate agreed upon four or five months ago. Some people are awaiting a downturn, but this doesn’t look forthcoming. Things have settled after the budget, but the cost-of-living crisis will be felt this winter.
The upside is that the property market is less frenzied than it has been over the last 18 months and buyers appear to be more level-headed in their offers, and we see a softening in prices being achieved.
First-time buyers appear to be optimistic that the availability and pricing of property will improve as they consider the impact of higher mortgage rates on their position. However, the market today is less volatile than it was last month.
There are still reasons to be optimistic as a new Prime Minister, and Chancellor has led to borrowing costs falling in recent weeks. This could continue as the pound bounces back in value and business confidence restores.
