UK house prices grew at their slowest pace since the beginning of 2024 in October, as property specialists warned that the Budget had done little to revive the struggling housing market. The average UK house price climbed by 0.5 per cent this month to £273,566, according to Nationwide, easing back from 0.8 per cent growth the previous month and 1.6 per cent in August.
Mortgage rates and Budget pressures weigh on market
Soaring mortgage rates triggered by the Iran war, coupled with escalating construction costs and excessive red tape, have taken a heavy toll on Britain's housing market, with the sector voicing frustration at the government's lack of meaningful support in the Budget. Property analysts at Nationwide warned that expectations of imminent Bank of England interest rate rises are weighing heavily on the market, driving up mortgage costs and prompting prospective buyers to put their decisions on hold.
The Bank faces mounting pressure to increase interest rates at its meeting next week, with money markets now pricing in as many as four rate rises before next summer, as reported by City AM. Robert Gardner, Nationwide's chief economist, said he anticipates "further softness" in the housing market over the coming months, as consumer sentiment continues to worsen.
Transactions fall and industry reacts
The number of housing transactions across the UK dropped by four per cent to 94,000 in September, HMRC confirmed on Friday, providing yet another indication that the property market is running out of steam. Tom Bill, head of UK residential research at Knight Frank, said slowing price growth and falling mortgage approvals have meant "the toll of the Middle East conflict on the UK housing market is more obvious with each passing month".
He argued that John Healey's first Budget on Wednesday fell short of introducing sufficient measures to address the considerable challenges confronting the housing market. "The impact of rising mortgage costs eclipses any support measure announced in this week's Budget, although the absence of major shocks from the Chancellor may produce a modest relief bounce in coming months," he said.
Tax changes and first-time buyer support
Property specialists and estate agents have rounded on Healey for unveiling a further two per cent tax increase on rental income, warning it will drive up rents and shrink the pool of available properties to let. Housebuilders welcomed the Chancellor's introduction of a new equity loan scheme designed to help first-time buyers onto the property ladder, yet the government has drawn criticism for barring buyers of London properties valued above £650,000 from accessing the relief.
Jason Tebb, president of homes portal On The Market, said: "The Bank of England's decision to hold interest rates throughout this year has helped affordability and confidence, but there are fears that rising inflation may finally force its hand at next week's meeting, with the first rate rise this year. The Budget delivered targeted support for first-time buyers but there wasn't much else of consequence to really boost activity in the market."
Meanwhile, Anthony Codling, an analyst at stockbroker RBC, warned that the slump in demand for housing will "test even the most resilient" of housebuilders if it continues much longer.
