UK House Prices Decline as Mortgage Costs Weigh on Demand
Average home prices dropped 0.2% during the month to £274,251 ($363,523), according to figures from Nationwide Building Society. The decline was unexpected, as economists had forecast prices to remain unchanged.
September marked the fourth monthly decline in the past five months and represented the second-largest monthly drop of the year. Prices previously fell 0.6% in May as the impact of the Middle East conflict began to affect prospective buyers and broader market conditions.
The latest decline followed a limited recovery in August, when Nationwide recorded a 0.2% monthly increase. Annual house price growth also stood at 1.6% that month, while the average property price reached £275,465.
Rising mortgage rates are once again placing pressure on the housing market, with borrowing costs approaching 6%. Higher financing expenses could discourage potential buyers from entering the market as households reassess their spending and borrowing plans.
Household budgets are also facing additional pressure from rising energy costs. Energy bills increased from Thursday, with another rise expected in January, potentially leaving households with less money available for mortgage payments, deposits and other housing-related expenses.
Earlier in the year, household savings accumulated over time, along with government measures aimed at easing cost-of-living pressures, provided some support to housing demand.
Nationwide previously warned that geopolitical uncertainty and the Middle East conflict were contributing to higher energy prices and increased market interest rates. These factors have contributed to weaker activity across the housing sector.
Despite the recent weakness, Nationwide said housing affordability had been improving because wage growth was outpacing house price growth. However, the benefit of stronger earnings has been partly offset by the increase in mortgage rates.
Nationwide chief economist Robert Gardner said a stronger recovery in housing activity would depend partly on an easing of the energy shock and an improvement in consumer confidence.
He also indicated that a return of market interest rates toward levels seen before the conflict could help support a recovery in housing demand.
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