01 September 2023
If you are covering the Nationwide House Price Index for August, please see the following comment from Charlotte Nixon, mortgage expert at Quilter:
“Nationwide’s most recent house price index underscores the deepening concerns about the UK's property market. August saw a 0.8% monthly slump in house prices, making it clear that the housing sector is grappling with external pressures that are pushing the indices into negative terrain. On an annual scale, the decline is more pronounced at -5.3%, signifying a fairly big drift from July's -3.8%.
“Borrowing costs have been on a significant uptick in recent months, a change that is sending shockwaves through the housing market, with figures showing activity levels that have not been this low since well before the pandemic. This is well illustrated by previous figures this week showing that mortgage approvals are well below the 2019 average.
“There is no doubt that the housing market is under strain at the moment but this still may be a relatively minor blip. While on one hand, rising borrowing costs and the unpredictability of the global economy might be influencing this trend, on the other hand, the inherent human drive for homeownership, especially post-pandemic, remains strong and if stability can be found in the coming months and interest rates can stay relatively steady demand is likely to return especially given wage inflation has been so strong recently.
“However, bloated house prices have for a long time locked people out of the market and a small down turn does unlock the potential for enhanced housing affordability in the long run. Lower house prices, coupled with steady nominal income growth, might rekindle the hopes of first-time buyers. However, a potential tug-of-war between affordability and higher borrowing costs is on the horizon.
“Ensuring a soft landing for the housing market amidst these economic headwinds might require a combination of strategic interventions, from revisiting borrowing guidelines to potentially invigorating the construction sector. This is something we have seen in the last couple of weeks from the government when it announced it would loosen planning rules when it comes to polluting rivers from house construction.”
