UK annual house price growth slows to 0.8% as mortgage costs rise
UK house prices fell 0.2% month on month in September and rose 0.8% annually, Nationwide said. The annual increase was half August’s rate. The lender linked subdued activity to energy-price and inflation concerns connected with the Middle East conflict and resulting pressure on mortgage rates.
Annual UK house price growth slowed to 0.8% in September, half the rate recorded in August, while prices fell 0.2% over the month, according to Nationwide. The average British home was priced at £274,251. September’s annual increase was the weakest since December last year, as economic uncertainty and higher mortgage costs weighed on the housing market.
Nationwide chief economist Robert Gardner said geopolitical tensions and the conflict in the Middle East were putting upward pressure on energy prices and increasing inflation concerns. He said those developments had strengthened expectations of higher Bank of England interest rates, which in turn kept pressure on the market rates that underpin mortgage pricing. The average rate on a two-year fixed mortgage had risen to its highest level since July 2024, while the average five-year fixed rate was at its highest since October 2023, according to Moneyfacts.
Both rates were above 5.9% earlier in the week. Financial markets were pricing in a 92% chance of a Bank of England increase from 3.75% to 4% at its November 5 meeting. Markets also expected at least three further increases in 2027, potentially taking the base rate to 4.75% by the end of that year.
The Bank is seeking to reduce inflation, which stood at 3.1%, towards its 2% target. Nationwide said East Anglia recorded the sharpest regional decline, with prices down 0.7% annually. Northern Ireland recorded the strongest growth, at 5.9%.
Gardner said affordability was improving because house price growth had remained below earnings growth, although higher mortgage rates had partly offset that benefit. He said market activity could recover if the energy shock eased and confidence returned. Prospective first-time buyers were also preparing for the government’s Your First Home scheme in England.
The programme is intended to provide a government-backed equity loan equal to 20% of the purchase price, with a minimum deposit of 2.5%, and applies to new-build homes.
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