UK house prices rose 0.9% in the month to October, but are down 3.3% from a year ago, leaving homebuying activity “extremely weak,” according to Nationwide’s latest House Price Index.  

The study points to Bank of England data earlier this week, which shows that mortgage approvals in September fell to 43,300, “around 30% below the monthly average prevailing in 2019”.  

Nationwide chief economist Robert Gardner says: “This is not surprising as affordability remains stretched.   

“Market interest rates, which underpin mortgage pricing, have moderated somewhat but they are still well above the lows prevailing in 2021.”  

The market will look to the BoE’s Monetary Policy Committee base rate decision tomorrow for guidance on future house price affordability.  

The MPC held rates at their last meeting in September, at 5.25%, and are widely expected to do so again, but the body has lifted the base rate 14 times since December 2021.  

UK inflation remained unchanged at 6.7% in the year to September, while wages rose by 8.5% in the year to July.   

Nationwide’s Gardener points out: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.   

“There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.”  

Gardener adds: “Activity and house prices are likely to remain subdued in the coming quarters.   

“Despite signs that cost-of-living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries.”  

L&C Mortgages associate director, communications, David Hollingworth says: “Mortgage borrowers will be hoping that the base rate is held again this week, which will at least give more hope that the peak has been reached.    

“Although the expectation is that interest rates may remain at this level for some time to come, fixed rates have been falling, as the outlook improves and lenders pass through an easing in funding rates.”   

Quilter mortgage expert Karen Noye adds: “Activity looks set to remain subdued, but rate reductions will at least give movers more clarity on mortgage costs.”  

“Tomorrow’s BoE interest rate decision will reveal whether prospective buyers can hope for a more stable interest rate environment, and will also play a role in how house prices fare in the coming months.   

“If the Bank opts to hold rates, predictability will improve which can be invaluable for prospective buyers.   

“However, if the Bank opts to hike rates further then it will prolong the dearth of demand in the market which could see house prices dip.”  

Charles Stanley Direct chief investment analyst Rob Morgan says: “Overall, house prices have proven resilient despite the huge ramp up in interest rates over the past two years, thanks largely to growth in rental income, an overall shortage of homes and rising wages.   

“Yet, going forward the picture looks increasingly bleak. There remains a significant affordability gap to close, so it would not be a surprise to see price falls continue into 2024 as more households become affected by rising interest rates and relatively few people can commit to make their first purchase or trade up.”