UK house price growth slows to 10-month low

House price growth in the UK has slowed to its lowest rate since January, according to Nationwide Building Society.

UK House price growth slows
Annual house price growth in the UK last month slowed to its lowest rate since January, according to the latest index from the Nationwide Building Society.The 4.4 per cent year-on-year increase in November, when a monthly rise of 0.1 per cent was recorded, brought the average property value across the country to £204,947.

In line with growth rates from 2015

But Nationwide said there were signs that demand for property had picked up in the past few months and Robert Gardner, the society's chief economist, said the latest increase was broadly in line with growth rates seen since early 2015."There are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs. Mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly," he said."The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the quarters ahead, even if economic conditions weaken, as most forecasters expect.“Data from the Council of Mortgage Lenders suggests that over 90 per cent of new mortgages were contracted on fixed rates over the past 12 months. This may be driven by a desire to lock in record low interest rates. “The proportion of new mortgage lending contracted on fixed rates has increased considerably since the low point in 2010, when less than half of lending was on fixed rates. In recent years, the proportion of lending accounted for by fixed-rate deals has persisted at levels well above those prevailing before the financial crisis.“Fixed-rate deals are most popular amongst first-time buyers for whom certainty over monthly payments is likely to be particularly important. Indeed, over the past 12 months, 95 per cent of new mortgage lending to first-time buyers was on fixed rates.”

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"Onwards and slowly, but surely, upwards"

Rob Weaver, director of investments at property crowdfunding platform Property Partner, commented, "Onwards and slowly, but surely, upwards seems to be the trend with a mildly stronger performance in November. The housing market is showing remarkable resilience in spite of a few wobbles in confidence post-Brexit."We're not in the dizzying double-digit percentage increases of mid-2014 but still house price growth, at least for those who have already bought, is comfortably creeping up."Interestingly, the real certainty in uncertain times is the undeniable dearth in not only current available stock for sale but also longer-term housing supply in the UK, which is acting as a buttress for prices."Combined with cheap borrowing rates and continuing high employment, house prices particularly in London and the South East are only heading one way in the mid to long-term – and that's up." 

Increasing pressure in 2017

Howard Archer, chief UK and European economist at IHS Global Insight, added, “House prices look likely to rise modestly in the near term. However, we suspect that house prices will come under increasing pressure as 2017 progresses and may edge down over the year, possibly by around two per cent.” Samuel Tombs at Pantheon Macroeconomics pointed out the index had flatlined over the past two months and that, as the Nationwide data is based on lenders' mortgage offers, "it should already have registered any boost to loan values from the fall in mortgage rates since the referendum". He continued, "Looking ahead, the likely stagnation of households’ real incomes in 2017, after a three per cent or so year-over-year increase this year, will drain momentum from the market. The financial policy committee’s loan-to-income ratio rule also increasingly is constraining a further increase in the average loan size, while the rise in swap rates back to pre-referendum levels suggests that the recent fall in mortgage rates will be reversed."

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