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Nationwide reports house price growth slows to 10-month low

Posted 5 December 2016 by Ben Salisbury

The Nationwide Building Society reports that house prices rose by 0.1% in November, the slowest rate of growth since January this year

The rate of house price growth in November fell to its lowest level since January this year, according to the latest Nationwide house price index.

The UK’s second largest mortgage lender said prices went up by just 0.1% in November, which means that annual house price growth went up to 4.6% from 4.4%, taking the average property value to £204,947.

The slowing of the rise in house prices will give some comfort to first-time buyers as they struggle to save the necessary deposit to try and buy their first home using schemes such as Help to Buy.

Nationwide said that there had been signs that demand for property had improved over the last few months.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “There are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs. Mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly.

“The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the quarters ahead, even if economic conditions weaken, as most forecasters expect.

Nationwide said that fixed rate mortgages have been the most popular type with borrowers trying to secure longer-term deals while mortgage rates are at historically low levels.

Nationwide said that data from the Council of Mortgage Lenders suggests that over 90% of new mortgages were contracted on fixed rates over the past twelve months.

The lender said: “Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Indeed, over the past twelve months 95% of new mortgage lending to first time buyers was on fixed rates.”

“Borrowers taking out fixed rate mortgages have benefited from historically low interest rates. For example, in October the average two year fixed rate (for those with a 25% deposit) was 1.51%, over two percentage points below the level prevailing in 2012. Moreover, for borrowers with a 10% deposit, two year fixed rates are currently the lowest on record, at 2.42%.”

eMoov.co.uk chief executive, Russell Quirk, said: “The UK property market has really taken a battering from a multitude of influences this year causing uncertainty in the sector and, it has weathered the storm, with prices still maintaining their upward trend this late in the year, albeit slowing the pace.”

Nick Leeming, Chairman at Jackson-Stops & Staff, comments:  “There is no change to the equation that has governed the housing market so far in 2016: there remains a fundamental undersupply of homes.

“The Chancellor showed support for boosting housing supply in his Autumn Statement and I hope that when the detail of the housing white paper is announced in January we see further commitments and signs of real positive action towards tacking the UK’s housing crisis. It was disappointing that the Chancellor did not ease the stamp duty burden in his statement.” 

Howard Archer, Chief UK & European Economist at HIS Global said: “With housing market activity coming off its recent lows and the economy currently resilient, house prices look likely to rise modestly in the near term.

“However, we suspect that house prices will come under increasing pressure as 2017 progresses and may edge down over the year, possibly by around 2%.

“Housing market activity and prices are also likely to be pressurized by stretched house prices to earnings ratios and tighter checking of prospective mortgage borrowers by lenders.

“However, it is likely that any downside for house prices will be limited markedly by a shortage of houses for sale. Indeed, the RICS remarked in their October survey that anecdotal evidence suggests that the tight supply conditions are a very dominant feature of the market at present.”

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