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

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

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.

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. ‘