UK house prices suffered their first monthly decline in October since July 2021, according to survey released on Tuesday by Nationwide.
Prices fell 0.9% on the month, having been flat in September, marking the largest monthly fall since June 2020.
On the year, meanwhile, house prices were up 7.2% in October, down from 9.5% growth a month earlier, with the average price standing at £268,282.
Nationwide chief economist Robert Gardner said the market had undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in interest rates.
“Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation,” he said. “The market looks set to slow in the coming quarters. Inflation will remain high for some time yet and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.”
Gardner said the outlook was “extremely uncertain”, and much will depend on how the broader economy performs, “but a relatively soft landing is still possible”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The current level of mortgage rates implies that the buyer of the average property with a 75% LTV ratio loan must commit to monthly repayments that absorb around 34% of their households’ disposable income, up sharply from 27% just three months ago and 21% a year ago.
“Few potential buyers will pass lenders’ stress tests, designed to see if they could make repayments if their mortgage rates rose by a further 2-to-3pp. Many others won’t be willing to commit to such a large jump in their housing costs; continuing to rent will be cheaper in most cases.”
