Housing Market Weak but cautious optimism from analysts

UK housing market activity "remains weak" according to the Nationwide.

Its latest house price index shows that prices declined 5.3 per cent on-year last month - no change from August. 

Nationwide chief economist Robert Gardner says: "Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, 30 per cent below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability.

"However, investors have marked down their expectations for the future path of bank rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening. This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home."

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments in response: “The property market paused for breath in September. The question will be whether it’s going to plummet, bounce back, or plateau, and on balance, there’s a good chance it’s going to hold tight.

“The Bank of England paused rate rises, and we’ve seen the major lenders cut their mortgage rates slightly … Meanwhile, relatively strong employment and sky-high rents may well keep a floor under house price falls. So rather than crashing or bouncing back, prices could plateau for a while. In markets like this, we can see a gradual drift south, but right now we’re not expecting anything dramatic.”

And Karen Noye, mortgage expert at Quilter, says: “There might be a glimmer of hope on the horizon now that we should have reached or neared the peak of interest rate rises. This means people who have seen significant wage growth over the last year can now better plan their finances for a property purchase amidst this more stable interest rate environment. That said, we are not likely to see a great decline in mortgage rates any time soon and as such many will remain priced out the market despite higher wages. 

“The housing market remains in flux at the moment, any apocalyptic predictions for a huge price crash so far look unlikely to materialise but the market is still by no means out of the woods. Prices may continue to edge downwards or stay flat as they have done this month for the next few months before the road to full economic recovery becomes clearer.”

Tom Bill, head of UK residential research at Knight Frank, comments: “Fourteen consecutive rate rises have taken their toll on the property market but more stable lending conditions means buyers and sellers will be able to catch their breath.

“The number of people rolling off more favourable fixed-rate mortgages won’t fall in 2024, but sentiment should improve as volatility reduces. We think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”