UK house prices barely rose in month before Budget, lender says
Market activity likely to strengthen gradually as affordability constraints ease with lower interest rates and earnings outpacing house price growth
UK HOUSE prices rose less than expected in October, said one of the country’s biggest mortgage lenders, suggesting that the property market was already losing momentum before the shock Budget on Wednesday (Oct 30).
Nationwide Building Society said that the average price of a home rose just 0.1 per cent to £265,738 (S$453,970), down from a 0.6 per cent increase in September.
Economists had forecast a 0.3 per cent gain.
It left prices 2.4 per cent higher than a year earlier, but below the all-time high seen in the summer of 2022.
However, the survey was taken before the Budget on Wednesday roiled financial markets as traders scaled back bets on how much more the Bank of England (BOE) will cut interest rates in the wake of a huge increase in government spending and borrowing that risks fanning inflation.
While the BOE is expected to deliver a second reduction at its meeting on Nov 7, hopes of a follow-up move in December have all but evaporated, indicated swap pricing.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
On Thursday, the pound fell to its weakest since August and homebuilders led a sell-off in UK shares as swaps rates that are used to price mortgages spiked.
The Budget also raises questions about how well consumer sentiment will hold up after Chancellor Rachel Reeves announced the biggest tax hike in 31 years to help repair public services and plough money into investment.
While businesses will bear the brunt, there are fears that workers will also pay a price as firms withhold pay rises and increase prices to protect their profit margins.
The developments are a setback for the housing market, which had been gaining momentum in recent months on the back of cooling mortgage costs. Earlier this week, BOE data showed that mortgage approvals climbed to its highest in more than two years in September.
“Housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth,” said Robert Gardner, Nationwide’s chief economist. BLOOMBERG
Share with us your feedback on BT's products and services
