UK residential property prices showed minimal growth in October, advancing at an annual rate of 0.5%, marking the slowest pace in more than two years according to data from mortgage lender Nationwide. The average property price stood at £273,566, remaining essentially flat compared to the previous month and down from 0.8% growth in the year-over-year comparison through September.
The market slowdown coincides with a significant rise in borrowing costs for homebuyers. Fixed-rate mortgage rates climbed notably, with five-year products breaching the 6% threshold for the first time in three years. Data from financial information provider Moneyfacts showed five-year rates averaging 5.99%, while two-year rates were nearly as high at 5.97%. Although the Bank of England has maintained its base rate at 3.75% with no adjustments since last December, volatility in bond markets has elevated swap rates that determine the pricing structure for fixed-rate mortgages.
Economists and market analysts attributed the price stagnation to weakened buyer demand and diminished consumer confidence. Robert Gardner, Nationwide’s chief economist, noted that geopolitical tensions in the Middle East have intensified inflation concerns, bolstering expectations for higher interest rates. Surveyors have reported soft buyer inquiry levels, while consumer sentiment declined noticeably in October as households reassessed their economic outlook and personal financial prospects.
Government efforts to support the market showed limited immediate impact. The chancellor introduced a £4.7bn Your First Home scheme this week aimed at assisting first-time buyers without family financial backing. However, analysts suggested that rising mortgage costs overshadow such policy interventions. Tom Bill from Knight Frank indicated that asking prices would need adjustment to reflect the more restrictive financial conditions facing purchasers, though modest market improvement could emerge in coming months. Rob Wood of Pantheon Macroeconomics projected that while the government scheme might provide some support, property prices would likely remain subdued through next year.
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