House prices fell almost £4,500 in November to an average of £263,788, says Nationwide, after rocketing mortgage rates hit potential buyers
House price growth slowed to just 4.4 per cent in November, down from annual property inflation of 7.2 per cent the month before, according to the latest Nationwide House Price Index.
The huge jump in mortgage rates after Kwasi Kwarteng’s ill-received mini-Budget, slammed the brakes on the property market and between October and November house prices fell by almost £4,500
This 1.4 per cent decline was the largest monthly fall since June 2020 and more than the 0.9 per cent fall recorded between September and October.
The change brings the average house price in the UK down to £263,788, down from October when it stood at £268,282.
Nationwide: Year-on-year house price growth dropped to 4.4% in November, down from 7.2% in October
After the mini-Budget, mortgage lenders pulled their top deals en-masse and repriced those that were left, with average two and five-year fixes climbing above 6.5 per cent.
While fixed mortgage rates have come down recently, theyr emain substantially higher than a year ago. The current best five-year fixed rates are at about 4.85 per cent, compared to 2.5 per cent this time last year. Borrowers can check the best rate they could apply for based on home value and loan size, with our best mortgage rates calculator.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said: ‘While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum.
‘Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.’
Gardner continues that the market is likely to remain subdued in beyond the new year, as inflation and interest rates remain high.
‘The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible,’ he said.
‘Longer term borrowing costs have fallen back in recent weeks and may moderate further, especially if investors continue to revise down their expectations for the future path of bank rate.’
Going down: The average UK house price fell 1.4% to £263,788 last month, according to Nationwide
Affording a home still a stretch for many
Despite the fall in prices affordability continues to be stretched across the country due to the rise in mortgage rates.
In London and the South East the average buyer is now among the top earners in the region, sitting in the 90th income percentile.
However, the biggest deterioration in affordability since 2019 has been in Wales, with the typical buyer now located in the 60th income percentile, compared to the 40th percentile in 2019.
But there is some good news. Fixed rates are continuing to slowly drop with five-year remortgage rates falling from their peak, dropping from an average of 5.67 per cent at the start of November to 5.07 per cent across the top ten lenders, according to mortgage broker L&C.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: ‘Prices are softening but could have fallen further were it not for those two stalwarts – shortage of supply and strong employment, despite continuing concerns over the rising cost of living and particularly mortgage repayments.
‘The problem is not existing sales, the overwhelming majority of which are proceeding, but new business.
‘However, some buyers are returning now that mortgage rates are beginning to fall but they are more aware of their stronger position so are negotiating hard.’
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, have been urged to act but not to panic.
Banks and building societies are still lending and mortgages are still on offer with applications being accepted.
Rates are changing rapidly, however, and there is no guarantee that deals will last and not be replaced with mortgages charging higher rates.
This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value
What if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.
Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to higher mortgage rates limiting people’s borrowing ability.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.
You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check the best fixed rate mortgages you could apply for