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UK house prices fall at fastest pace since 2020

UK house prices have fallen at their fastest rate for two and a half years as the fallout from Liz Truss’s disastrous mini-budget put buyers off, according to Nationwide, which warned inflation and rising interest rates would weigh on the market in the coming months.

The price of an average home dropped 1.4% to £263,788 in November, according to the lender’s house price index, accelerating a slowdown that saw prices fall 0.9% in October. It was the third monthly fall in a row and the biggest drop since June 2020.

On an annual basis, annual house price growth slowed sharply to 4.4% in November from 7.2% a month earlier.

The slowdown in November illustrated the lasting impact of September’s mini-budget, which spooked markets and increased borrowing costs. While government borrowing rates have eased since then, average fixed mortgage rates are still hovering at about 5% and have continued to weigh on demand.

“While financial market conditions have stabilised, interest rates for new mortgages remain elevated, and the market has lost a significant degree of momentum”, Nationwide’s chief economist Robert Gardner said. “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.”

Nationwide said a larger proportion of people have been priced out of the market and have needed to borrow more money to buy a home.

Surging inflation hit 11.1% in October – its highest level since 1981 – on the back of surging energy bills, reducing UK households’ spending capacity, including prospective homebuyers.

The slowdown in house prices indicates that the market has cooled relative to the strong growth observed during the pandemic, when in the “race for space”, people sought larger homes after UK-wide lockdowns.

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