House price growth slows as buyers wait for budget

House prices barely moved in October as some would-be buyers decided to put moves on hold while they waited to see what was in the budget.
The price of a typical UK home increased by 0.1 per cent last month, slower than in September and taking the average house to £265,738, according to data from the high street lender Nationwide.
Compared with this time 12 months ago, house prices are 2.4 per cent higher, a slowdown from the 3.2 per cent pace recorded in September.
Both measures of house price inflation were lower than economists’ forecasts. The expectation had been that month-on-month there would have been a 0.3 per cent rise in prices in October and the annual rise was estimated to come in at 2.8 per cent.
Nationwide also revised down September’s monthly rise from 0.7 per cent to 0.6 per cent.
Robert Gardner, Nationwide’s chief economist, said that housing market activity had “remained solid in recent months”, pointing to rising mortgage approvals, which are now approaching pre-pandemic levels again.
Housebuilders and estate agents, however, have reported a slight slowdown in the market over recent weeks before the budget. Jason Honeyman, chief executive of Bellway, said recently that he had seen a “little bit of caution” among buyers. “Some customers are nervous about the October budget and that has slightly dampened sales rate through our autumn trading period,” he said.
Alex Kerr, UK economist at Capital Economics, said the “weaker-than-expected [data] suggests that the recent falls in mortgage rates may be providing less support to demand and house prices” than many had assumed.
Bond market investors think that interest rates may now stay higher for longer, with swap rates, which dictate mortgage rates, having risen since the budget.
If swap rates remain elevated, Anthony Codling, a housing industry analyst at RBC, warned that mortgage rates would go up, which would “temper house price growth and housing market activity as we move into a traditionally quieter period of the year”.
Kerr agreed that “there is scope for mortgage rates to rebound and provide even less support over the next few months”, although he thinks any retreat in prices will be short-lived.
As it stands, the consensus is that the Bank of England will cut interest rates from 5 per cent today to a low 4 per cent, but Kerr believes the Bank will go further and lower rates to 3 per cent by 2026. That, he thinks, will help to push house prices up by 5 per cent next year.