House prices in the United Kingdom rose modestly in October, recording a 0.9% month-on-month increase, according to data from Nationwide’s Monthly Index. Despite this uptick, prices remain 3.3% lower than those of October last year.
The seasonally adjusted figures reveal that the Monthly Index increased from 512.8 in September to 517.2 in October. Although this marks a positive shift from the near-stagnant 0.1% growth recorded in September, it does little to counter the overall decline in house prices. The average house price for October stands at £259,423, up from £257,808 in September.
Robert Gardner, Nationwide’s chief economist, offered a tempered outlook. “October saw a 0.9% rise in UK house prices, after taking account of seasonal effects. This resulted in an improvement in the annual rate of house price growth to -3.3%, from -5.3% in September,” said Gardner.
However, Gardner highlighted the continued sluggishness in housing market activity. He pointed to the fact that only 43,300 mortgages were approved for house purchase in September, around 30% below the monthly average in 2019. “This is not surprising as affordability remains stretched,” Gardner noted.
Market interest rates, which dictate mortgage pricing, have somewhat moderated, but remain elevated compared to the lows of 2021. Gardner suggested that the rise in house prices in October is most likely due to constrained supply, with little evidence of forced selling that could otherwise drive prices downward.
The data also points to continued softness in the housing market. Despite slight improvements in the cost of living, consumer confidence remains low, as does the level of new buyer enquiries, according to a report from the Royal Institution of Chartered Surveyors (RICS) for October.
Gardner concluded that it seems unlikely borrowing costs will return to the historic lows seen in the aftermath of the pandemic. “Instead, it appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim,” he said.
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Ranald Mitchell, director at Charwin Private Clients:
“We saw a surprising uptick in activity in October with a much healthier number of purchase enquiries. It feels like those people who have stalled due to interest rate volatility are all now coming forward, having had time to get used to the new cost of mortgage funding. With house prices lower than they have previously been, there is a growing opportunism creeping into the buyer market, despite the higher lending costs. One thing’s for sure, if what we are seeing this October is reflective of the market as a whole, then things, may, just may, be starting to turn a corner.”
Jamie Lennox, director at Dimora Mortgages:
“October was a strong month in terms of mortgages submitted following a quiet August and first half of September. But even though there are higher activity levels, the market is still very quiet in historical terms and there’s certainly no rebound yet. As the Nationwide suggests, the base rate is not likely to decline significantly for some time due to inflation. However, as mortgage rates fall, we are now seeing more borrowers looking to jump to secure a new deal. First-time buyers are particularly active, as they are snapping up a bargain from financially distressed households having to sell. However, there still remains a real lack of the next time movers looking to move further up the housing ladder. For many households, the prospect of upsizing in the current climate, and with rates where they are, is simply not appealing.”
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions:
“The UK property market is once again showing its resilience based on this evidence. We experienced an unexpectedly high volume of enquiries in October, with most coming from first-time buyers. There’s life in the market yet. In Leicester, and I’m sure many parts of the UK, people who have saved up for a deposit are opting to buy at current mortgage rates rather than wait for them to drop, with the catalyst being exceptionally high rents and the knowledge that now is about as good a buyers’ market as you could get. This trend of first-time buyers driving activity in the market has been going on for a few months. But while first-time buyers are having a field day, buy-to-let activity has been almost non-existent. The impact of higher rates has hit many landlords for six.”
Craig Fish, director at Lodestone Mortgages & Protection:
“In our experience, both residential purchase and buy-to-let were slow in October, although there was a slight pick-up towards the very end of the month. Demand is way off where it would normally be at this time of the year. With the property market in limbo, the majority of our business has been product transfers, especially for our landlord clients. I suspect the remainder of the year will be equally as quiet despite lender rate reductions, and hope that 2024 starts in a much more positive manner than 2023 ends.”
Justin Moy, managing director at EHF Mortgages:
“October has been a far busier month than September, with more purchase enquiries than we have seen for the past 12 months, although that wasn’t particularly hard to achieve. Buyers are definitely taking time to find the right property and are not making snap offers, carefully looking at local price comparisons. Landlords continue to be under pressure, not only due to high mortgage rates and fees, but portfolio stress testing makes those who are heavily geared really struggle to refinance. The property market is going to take a long time to improve for all borrowers, whereas outright cash buyers are having a field day. Product transfers have continued to be the most popular mortgage application, with clients feeling positive there are further rate cuts on the horizon but still having concerns about monthly payments.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“October was another month that saw plenty of properties come onto the market but limited sales agreed. In contrast to what this data suggests, the property market looks to be going into hibernation until the Spring, unless a noticeable drop in house prices and mortgage rates provides the necessary wake-up call. With November and December not traditionally busy months, most will be hoping the new home buzz that typically starts in the New Year will spearhead the revival of the property market in 2024.”
Steven Hargreaves, mortgage and protection adviser at The Mortgage Co:
“October has seen plenty of positivity and enquiries, but not much in the way of new mortgage applications. Sentiment has improved, but activity hasn’t. Many lenders are reporting low business levels and so are cutting fixed rates and, more importantly, their margins, in an attempt to secure their market share among what are very low levels of borrowing. The fixed rate war looks set to continue.”
Simon Bridgland, broker/ director at Release Freedom:
“October has seen an upturn in transactions, with purchase activity twice the level we experienced in September. An equivalent upturn has also been experienced with later life cases showing a similar amount of confidence by consumers. Buyers are currently able to secure some good deals, with some punchy offers being accepted by under-pressure sellers. This will likely continue into the new year as more property comes to market all aiming to gain attention. Why wait in the hope prices will fall significantly? Sure, there will be small drops but nothing major, as demand is still eye-watering as renters are forced onto higher rents which they can’t afford, so naturally they do all they can to buy for themselves. As well as buyers taking advantage of lower prices, I feel the other winners in 2024 will be later life borrowers. With a significant volume of interest-only mortgages coming to an end, the competition between lenders for this type of business will be fierce.”
Graham Cox, founder at Self-Employed Mortgage Broker SEMH:
“The housing market is currently in limbo, as would-be home buyers delay purchases in the belief that 2024 will bring both lower house prices and mortgage rates. I expect property values to fall a further 10% by the end of 2024, even if we avoid recession. Current prices are simply unsustainable.”
Bob Singh, founder at Chess Mortgages:
“Malaise is the word I would use to describe the property market right now, but this data seems to suggest it is gathering momentum. October’s uptick in prices has certainly come out of the blue based on what we’re seeing. Activity levels are down in all areas of the market, from first-time buyers and home movers to landlords. The purchase market is on ice as first-time buyers await even lower mortgage pricing and house prices before they jump onto the ladder.
“The market is likely to remain subdued until we start to see base rate reductions in mid-2024. The base rate is likely to remain steady for the short term, which is at least keeping up the pressure on lenders to offer better priced deals. Much rests on this week’s Bank of England interest rate decision and the Autumn Statement. On a positive note, mortgage pricing is improving all the time. Margins are being cut to the bone by lenders to attract new business and we are seeing a lot of product innovation.”
John Choong, senior equity research analyst at Investing Reviews:
“Big questions remain as to how much further house prices will continue falling, but recent trends from both Nationwide and Halifax have certainly shown some mildly encouraging signs that the housing market correction may be close to the bottom. The fact that mortgage rates are also reducing on a weekly basis is starting to dissipate the affordability headwinds. With real wages also now trending positive, this should help to prop house prices up until demand returns in earnest.”
Ross McMillan, owner/mortgage advisor at Blue Fish Mortgage Solutions:
“In Scotland, October has seen a definite increase in enquiries from first-time buyers but many of these are now looking more towards planting their mortgage seeds for 2024 rather than looking to buy before Christmas. In some instances, this is due to a belief, or hope, that prices and rates may reduce in the coming months but for the majority, it’s simply a result of the usual seasonality where the dark nights tend to subdue activity and house-buying plans are put on hold at least until after the Hogmanay fireworks have exploded.
“Throughout October, closing dates have still been a frequent occurrence however, with some eye-watering percentages above home report valuations still often being achieved in the main hotspots of Glasgow and Edinburgh in particular. Buy-to-let remains as dead as the ghouls wandering the streets on Halloween, and overall the signs are that 2023 will finish with a whimper. However, sparks could well fly early in the 2024 in the Scottish housing market.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“Softer pricing reflects higher interest rates, which have a greater impact on affordability than asking prices. They also reflect the slowdown following last year’s mini bubble, where house prices were inflated by the stamp duty holiday and very low interest rates.
“The average house price is still higher than at the start of 2022, and a full-scale house price crash is unlikely. Housing is a necessity, and overall demand for places to live does not change as a result of the strength of the economy. Secondly, 36% of homes in England are owned outright, meaning they will not be affected by higher mortgage interest rates.”
Alex Lyle, director of Richmond estate agency Antony Roberts:
“More stock is coming onto the market at the right price and at less ambitious levels than in the past.
“While the market doesn’t feel as busy as it has been, a good address at the right price will sell, while overpriced, slightly compromised properties needing work are struggling. Sales are taking time to get through, chains are complicated and negotiations can be drawn out.
“Many buyers continue to wait and see as to what happens with mortgages. If the Bank of England doesn’t raise rates again, it’s a small step in the right direction.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These figures, though historically reliable, only cover Nationwide’s customers and don’t include cash buyers who are active at present.
“High mortgage rates and inflation may be compromising buyer demand but strong employment and shortage of properties for sale in areas of highest demand is keeping prices strong.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“While interest rates appear to have peaked, those hoping rates will move swiftly downwards again to the rock-bottom levels of the recent past are likely to be disappointed. Pricing is higher than borrowers have grown used to over the years, meaning those buyers relying on mortgages are more price-sensitive on the back of ongoing affordability concerns.
“Swap rates, which underpin the pricing of fixed-rate mortgages, are trending down again after a recent blip. While the direction of travel for new mortgage rates is generally downwards, we have seen a few lenders pull rates in the past few days, although this has been primarily in order to slow business.”
Tom Brown, managing director, real estate at Ingenious:
“Despite recent property data indicating a small correction in UK house pricing is underway the sector continues to demonstrate its resilience and popularity in the face of high inflation and higher borrowing rates. Nationally, there remains a significant shortage of housing inventory across most locations and price points. Consequently, any slow-down in sales volumes from homeowners is likely to be offset by increased demand from renters and investors.
“However, it’s essential to note that the situation is not uniform throughout the country and across all price ranges. When analysing opportunities, it is key to understand the underlying subsectors and regional dynamics. Taking too broad a view of the market can be misleading. For instance, the institutional housing sector has experienced fewer disruptions compared to the residential sector due to its long-term investment horizon, rental growth and substantial capital inflows.
“With rates forecast to be at or nearing their peak, we maintain a cautiously optimistic outlook and anticipate relative stability in the near future. At Ingenious, we leverage our market expertise to offer flexible, cost-effective financing solutions to our clients. We source residential opportunities from across the UK solely based on their individual merit, ensuring the best possible outcomes for our clients.”
David Hollingworth, associate director at L&C Mortgages:
“Although the latest monthly figures show an unexpected monthly increase in prices, the tone remains one of a housing market that continues to feel its way through a difficult period. Low activity levels tell the story of a market where many have disengaged as weakened confidence leaves movers looking for reasons to be positive. The rapid rise in interest rates coupled with the higher cost of living is clearly impacting on those that may have otherwise been looking to move or make their first purchase.
“Mortgage borrowers will be hoping that the base rate is held again this week, which will at least give more hope that the peak has been reached. Although expectation is that interest rates may remain at this level for some time to come, fixed rates have been falling, as the outlook improves and lenders pass through an easing in funding rates. Activity looks set to remain subdued, but rate reductions will at least give movers more clarity on mortgage costs.
“The lack of forced selling is encouraging but prices are likely to feel more downward pressure in the near term. The hope will be that more activity will gradually return to the market next year, as the more stable mortgage market and the prospect of lower inflation helps to further the current falls in mortgage rates.”
Tomer Aboody, director of property lender MT Finance:
“Rising property prices reflect the slight increase in confidence the market has due to rates stabilising.
“Although prices remain lower than last year, we need to put this into context as mortgages were also cheaper then. If the Government’s aim to half inflation remains on target, we should hopefully see a continued increase in confidence.”
Nathan Emerson, CEO of Propertymark:
“As expected, the Nationwide House Price Index shows us an overall dip in house prices year on year of over 3%. The picture is a little more positive when comparing last month’s figures with this month, however this is a trend we will need to watch closely before feeling more confident. There remains a high level of market uncertainty, not helped by high inflation which has translated into five interest rate hikes for homeowners and buyers to deal with this year alone.
“Propertymark’s own Housing Insight Report shows there has been a slight reduction in the number of available properties for sale at each member branch in September 2023, this fused with issues regarding the cost-of-living crisis continues to affect the housing market overall. Sales in some property segments remain extremely fragile, nonetheless rising incomes should help increase housing affordability across the next 12 months.
“It does however remain encouraging to witness many buyers still having the confidence to enter the market currently. Propertymark is hopeful to see a firm drop in inflation and for this to potentially translate into reduced interest rates.”
Karen Noye, mortgage expert at Quilter:
“This morning’s house price index from Nationwide suggests that despite the ongoing economic pressure and high interest rates, the property market is faring a little better than expected, with a 0.9% uptick in house prices reported in October.
“Despite this unexpected increase, however, the future of the UK housing market remains uncertain. Though inflation has continued to lower, house prices are nowhere near keeping up with the level of inflation elsewhere in the economy – particularly as Nationwide reported house prices are down 3.3% year on year. The Bank of England is also widely expected to keep interest rates higher for longer, which will pile continuous pressure on those with mortgages and will make taking the first step onto the property ladder unaffordable for many.
“Just yesterday, new figures showed the UK property market remains in a deep freeze, as UK residential transactions fell by 17% in September compared to the year prior. What would typically be a busy summer has been remarkably quiet as buyers have been in ‘wait and see’ mode. Given the property market tends to slow in the winter months anyway, we could see house prices buckle under the pressure and this 0.9% uptick may prove to be a one off.
“Tomorrow’s BoE interest rate decision will reveal whether prospective buyers can hope for a more stable interest rate environment, and will also play a role in how house prices fare in the coming months. If the Bank opts to hold rates, predictability will improve which can be invaluable for prospective buyers. However, if the Bank opts to hike rates further then it will prolong the dearth of demand in the market which could see house prices dip.”
