The mortgage lender’s house price index showed that values rose over the year by 1.6% to August, compared with 1.4% in July.
This means the price of a typical UK home is currently £275,465, according to Nationwide data.
“Market activity and house prices have remained weak in recent months, partly reflecting the uncertain economic backdrop,” said Robert Gardner, Nationwide’s chief economist.
“Geopolitical tensions remain high, as conflict in the Middle East exerts upward pressure on energy prices and market interest rates.”
He added: “Underlying affordability is improving, as house price growth remains well below earnings growth. Although some of these gains are offset by higher mortgage rates.
“However, this suggests that activity should regain momentum in the coming quarters, leading to an easing of the energy shock and a return to confidence, especially if market interest rates decline towards pre-conflict levels.”
The data comes just after the busiest weekend for home moves. Real estate agents say it’s a buyers’ market right now, but it’s not a bad thing for sellers.
Amy Reynolds, head of sales at Richmond estate agency Anthony Roberts, said: “On the ground, we are seeing prices holding steady with reasonable offers being accepted. There are more sellers than buyers, but sellers are not panicking – asking prices are coming down, but a lot of that is down to overpricing of initial prices that meet the time it takes to find market level.”
She added: “We hope that the market continues to gather momentum as we enter the fall and does not slow down prematurely before the budget is released, as was the case last year.
“As for the budget, it should focus on the recovery of the property market, so that people feel confident enough to move.”
Mortgage rates and the housing market
The slowdown in activity in the housing market was driven in part by higher mortgage rates. Prices have been greatly affected by events in the Middle East, but many buyers will also be affected by expectations of another rise in interest rates on the horizon.
The Bank of England is scheduled to meet next September 17 to set interest rates, so those who are thinking about buying a property may be eagerly awaiting the results of this meeting.
“The housing market remains stuck between resilient demand and uncertainty about where borrowing costs will go next,” said Ian Futscher, a financial planner at Quilter. “While buyers are becoming more accustomed to a rising interest rate environment, many are still reluctant to make large financial commitments when expectations continue to shift.”
He added: “Although a suspension remains the most likely outcome, it has become increasingly difficult to call with confidence. Markets are still pricing in the possibility of another rate hike this year, while others say policymakers may wait until after the Budget before acting so they can assess whether any fiscal measures help control inflation or instead increase inflationary pressures.”
“For borrowers, the key message is that interest rates may not have peaked. Many had hoped the conversation would focus on when cuts might arrive, but there is still a realistic possibility that borrowing costs will rise before they fall. Until this uncertainty resolves, buyer confidence is likely to remain weak.”
