House price growth slows to just 1.1%, according to Nationwide


Average house prices have fallen by £15,500 since August, Britain’s largest mortgage bank, Nationwide, reveals after mortgage rate hikes left buyers in a bind

  • The average house now costs £258,297, down from a peak of £273,751 in August
  • The annual growth of house prices remains just positive at 1.1%
  • Mortgage rates rise after the mini budget eroded buyer confidence

The average home has fallen in value by nearly £15,500 since house prices peaked in late summer, according to Britain’s largest building company.

The average house now costs £258,297, compared to £273,751 in August, but property values ​​remain 12.4 per cent higher than two years ago, according to Nationwide’s latest house price index.

The fall in house prices since the summer is the result of difficult economic conditions and higher mortgage rates, which are putting pressure on the market.

But Nationwide said annual property inflation is still just positive, with home prices rising 1.1 percent in the year to January

The average house now costs £258,297

Annual house price inflation fell again last month from 2.8 percent in December. The dramatic slowdown in the real estate market came after mortgage rates skyrocketed in the wake of Kwasi Kwarteng’s disastrous mini budget in September.

Fixed mortgage rates have since fallen from their peak, but with the Bank of England continuing to raise key rates, they remain much higher than they were a year ago.

Robert Gardner, Nationwide’s Chief Economist, said: ‘There are some encouraging signs that mortgage rates are normalizing, but it is too early to say whether housing market activity is starting to recover.

“The decline in home purchase approvals in December reported by the Bank of England largely reflects the sharp fall in mortgage applications after the mini budget.”

A total of 35,600 mortgages were approved in December, the lowest level since May 2020.

The average interest paid on new mortgages in December also rose 0.32 percent to 3.67 percent, the biggest monthly increase since December 2021, when the Bank of England began raising its base rate.

According to Moneyfacts, the typical two-year fixed-rate mortgage has fallen from a peak of 6.65 percent in October to 5.45 percent on January 31.

Five-year fixes followed a similar trajectory, falling from a peak of 6.51 percent in October to 5.2 percent today.

And, more good news for borrowers, lenders have started what brokers are calling a “price war.”

Major lenders, including Halifax, Santander and Barclays, have all cut their fixed mortgage rates in the past two weeks.

House price growth is starting to stagnate with prices rising just 1.1% over the year to January 2023

House price growth is starting to stagnate with prices rising just 1.1% over the year to January 2023

However, Nationwide’s Gardner cautioned that the rise in rates has affected affordability as potential buyers assess whether they can afford the cost of paying off a mortgage at current rates.

He said: “If recent mortgage rate cuts continue, this should help improve affordability for potential buyers, albeit modestly, as well as solid income growth (wage growth is currently around 7 percent in the private sector). certainly in combination with a weak or negative rise in house prices.’

Gardner also warned of tough economic times.

He added: “It will be difficult for the market to regain much momentum in the near term as economic headwinds will remain strong, real incomes are likely to fall further and the labor market is expected to weaken as the economy contracts. ‘

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate contract is about to expire, or because they have agreed on a home purchase, should explore their options as soon as possible.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to borrow again?

Borrowers should compare rates and speak with a mortgage broker and be prepared to trade to secure a rate.

Anyone with a fixed-rate deal expiring in the next six to nine months should research how much it would cost them to re-mortgage now — and consider getting a new deal.

Most mortgage agreements allow fees to be added to the loan and are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with an agreed home purchase should also aim to secure rates as soon as possible so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current highs, due to higher mortgage rates limiting people’s borrowing capacity.

Compare mortgage payments

The best way to compare mortgage rates and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that match your home value, mortgage size, term and fixed interest needs.

However, bear in mind that rates can change quickly, so if you need a mortgage it’s advice to compare rates and then speak to an estate agent as soon as possible so they can help you find the right one mortgage for you.

> Check out the best fixed rate mortgages you can apply for