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UK house prices recorded their sharpest monthly decline since May in September, as rising mortgage costs and pressure on household budgets weighed on the housing market, according to Nationwide Building Society figures reported by Bloomberg.
Average home prices fell 0.2% to £274,251 ($363,523), contrary to economists’ expectations that prices would remain unchanged.
The decrease was the fourth in five months and the second-largest monthly fall of the year. It followed a 0.6% decline in May, when prospective buyers began feeling the effects of the conflict in the Middle East.
Mortgage costs weigh on demand
The latest figures came after a modest recovery in August, when Nationwide recorded a 0.2% monthly increase and annual price growth of 1.6%. The average property price stood at £275,465 that month.
Mortgage rates approaching 6% are putting renewed pressure on demand. Households are also facing higher energy bills from Thursday, with another increase expected in January, potentially leaving less money available for deposits and mortgage repayments.
Household savings and the government’s summer cost-of-living measures had supported the market earlier in the year, the report said.
Energy prices and interest rates affect activity
In its August assessment, Nationwide said geopolitical uncertainty and the conflict in the Middle East were pushing up energy prices and market interest rates, contributing to subdued housing activity.
The lender said affordability had improved because earnings were rising faster than house prices. However, higher mortgage rates had offset some of those gains.
Nationwide chief economist Robert Gardner said a recovery in activity would depend on the energy shock easing and confidence returning, particularly if market interest rates moved back towards their levels before the conflict.
