All regions recorded annual house price falls in the third quarter with the South West the weakest performing region, down 6.3% year on year

Commenting on the figures, Nationwide’s chief economist Robert Gardner said:

“Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, c.30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability”.

“For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%”.

However, Gardner said investors had marked down their expectations for the future path of the Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening.

“This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing (see chart below). If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home,” he added.

GreenResi chief executive Anna Clare Harper comments: “Softer pricing is unsurprising as higher interest rates have a much larger impact on affordability than asking prices. Last year’s pricing levels, which were buoyed up artificially by policies such as the stamp duty holiday and very low interest rates, are no longer achievable.

‘However, unlike commercial property such as offices, which in many cases have fallen in value by 20-30%, it’s unlikely that we experience a full house price crash.

“Firstly, this is due to the ‘necessity’ of housing. We all need a roof over our heads. Secondly, a large proportion of the market are owned outright, and they are unaffected by mortgage interest rates. For this reason, fears of a ‘house price crash’ are unrealistic.

SPF Private Clients chief executive Mark Harris says that while a trend is developing among lenders with regard to mortgage rate reductions, pricing is still rather higher than many have grown used to over the past few years.

“Those buyers relying on mortgages are inevitably going to be more price sensitive on the back of ongoing affordability concerns.

“That said, the welcome hold in interest rates at the Bank of England’s September meeting will help buyer confidence, hopeful that the worst is behind us and that if inflation continues to decline, so too will the base rate”.