November saw the biggest fall in house prices since the first Covid lockdown two years ago, with annual house price growth of 4.4%, down from 7.2% in October. Prices fell 1.4% month-on-month, the building society said, following a 0.9% drop in October. The average price of a home in the UK now stands at £263,788, down from £268,282 in October.
Robert Gardner, Nationwide’s chief economist said: “While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum. Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.”
“The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time 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.”
However, the building society believes that despite current economic uncertainty, a soft landing is possible, partly due to the fact that 85% of mortgage holders are protected from steeper mortgage costs for the time being, as they are on fixed rate deals. A limited supply of properties for sale should also help support prices going forward.
Higher mortgage rates stretch affordabilityAlthough house price growth is slowing, first-time buyers are finding it even tougher to get onto the property ladder, not helped by recent increases in mortgage rates.
Nationwide analysed regional income data to work out where in the income distribution a prospective purchaser would sit if they were purchasing the typical first-time buyer property in each region, assuming they have a 20% deposit to put down and are borrowing four times their income. The higher in the income distribution they are located, the more affordability is stretched.
Mr Gardner said: “In broad terms, the picture that emerges is that this hypothetical typical buyer is located further up the income spectrum as you go from the north to south of the country.
“For example, in Scotland and the North of England, this typical buyer would be in the 30th income percentile, while in the South West they would be in the 80th percentile, and above the 90th percentile in London and the South East.”
Several regions have suffered a decline in affordability since 2019, with the biggest deterioration seen in Wales. The typical buyer there is now located in the 60th income percentile, compared to the 40th percentile three years ago.