August saw a slight softening in the rate of annual house price growth to 2.1%, from 2.4% in July, says the Nationwide.
Prices dipped by 0.1% month on month, after taking account of seasonal effects.
Robert Gardner, Nationwide’s chief economist, says: “The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms. House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many. Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.
“However, affordability should continue to improve gradually if income growth continues to outpace house price growth as we expect. Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, responds to the figures by saying:“We are not particularly surprised that prices have softened although agreed sales have held up well, supported by slowly improving affordability and recent reductions in base rate. However, with so much property still overhanging the market, many buyers are seizing the opportunity of negotiating hard whereas worried sellers often have no option but to agree revised terms in order for the transaction to proceed.
“Looking forward, we don’t see much change and certainly not much chance of a strong rebound in prices, given concerns about autumn tax rises, particularly for the property market.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says some mortgage lenders have been “pricing upwards” while others have cut rates. He adds: “The mixed picture is down to rising swap rates, which underpin the pricing of fixed-rate mortgages and lenders not wanting to offer the best rates during the summer months when staff are on holiday and resources are limited.
“While mortgage rates will always bounce around, we are not expecting any significant reductions or increases in the short term.”
And Jason Tebb – president of OnTheMarket, the portal which has recently signed a deal to list Grainger’s Build To Rent portfolio – adds: “The usual pattern of a significantly quieter summer for the housing market as people head off on holiday didn’t really materialise with evidence of steady activity as focused buyers and sellers proceeded with their moves. Average house prices are being kept in check by an increase in stock, which is likely to be even more the case as properties launch onto the market this autumn.
“Depending on what they are buying and where, generally speaking buyers are finding themselves in a strong position and are using that to negotiate on price.
“While much uncertainty prevails in the wider economy, five interest rate cuts in the past year have done much to boost the market, sustaining activity and momentum. Some lenders continue to reduce rates and ease criteria, further improving affordability among borrowers struggling with higher living costs. Further reductions will be crucial to encouraging confidence, particularly amid speculation as to what the autumn Budget might bring.”
This article is taken from Landlord Today