Annual house price growth slowed from 11% in August to 10% in September, the latest index from Nationwide shows.

Month-on-month prices increased by just 0.1% in September to reach £248,742, which was down from monthly growth of 2% in August when buyers were rushing to beat the end of the stamp duty holiday.

As a result house prices are around 13% higher than they were before the start of the pandemic in early 2020 after taking into account seasonal factors.

Nationwide also published quarterly statistics for regional house price growth which showed that growth accelerated in Wales, Northern Ireland and Scotland, but most English regions recorded a slowdown.

Wales was the strongest performing region with house prices up 15.3% year-on-year – the highest rate of growth since 2004. 

In Northern Ireland annual growth was 14.3%, while growth in Scotland picked up to 11.6% in Q3, in a turnaround from the previous quarter when it was the weakest performing part of the UK with growth of just 7.1% 

In England annual growth slowed to 8.5%, from 9.9% in Q2. 

Price growth in northern England continued to exceed that in the southern regions.

Yorkshire & Humberside was the strongest performing English region for the second quarter in a row, with prices up 12.3% year-on-year, followed by the North West, which saw an 11.4% rise.

London was the weakest performer, with annual growth slowing to 4.2% from 7.3% last quarter. 

The surrounding Outer Metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, also saw growth reduce to 6.8%, down from 8.2% in Q2.

Nationwide chief economist Robert Gardner says: “Annual house price growth remained in double digits for the fifth month in a row in September, though there was a modest slowdown.”

He points out that house prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched. 

He says: “Raising a deposit remains the main barrier for most prospective first-time buyers. 

“A 20% deposit on a typical first-time buyer home is now around 113% of gross income – a record high.

“Due to the historically low level of interest rates, the cost of servicing the typical mortgage is still well below the levels recorded in the run up to the financial crisis. 

“However, even on this measure, affordability is becoming more challenging.   

“For example, if we look at typical mortgage payments relative to take home pay across the country, it is notable that in the majority of UK regions (10 out of 13) this ratio is now above its long-run average. 

“By contrast, pre-pandemic, this was only the case in London.

“Recent price patterns suggest an element of rebalancing is occurring where most of the regions that have seen the strongest price growth are those in which affordability is still close to or below the long run average.”

Looking to the end of the year, Gardner says the housing market outlook remains uncertain.

He says: “Activity is likely to soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax. 

“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely.

“But this is far from assured. 

“The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic – such as wanting more space or to relocate – to continue to support activity for some time yet.”

Southampton-based Albion Forest Mortgages managing director Mark Robinson says: “Demand was exceptionally strong in September, with even less property available than in previous months, but few can deny that there are headwinds ahead. 

“Rising unemployment after furlough and affordability issues will reduce people’s ability to get mortgages, and therefore the demand for property. “That said, prices are more likely to stabilise than to drop given the lack of supply and first-time buyers still proving very active. 

“Lower price growth will definitely help those people seeking to get that first step onto the ladder, as it will ease affordability pressures. 

“Overall, the property market will continue to prove fairly resilient during the rest of the year, mainly due to the lack of homes for sale.”

Bristol-based Langley House Mortgages co-founder Robert Payne says: “The market shows no sign of slowing down just yet as demand in September remained extremely high. 

“Buyers applying now have no chance of benefiting from the reduced stamp duty relief so there are other drivers fuelling the activity, such as flexible and remote working. 

“There are conflicting opinions as to what will happen to the market moving forwards, but the lack of supply is the one constant and that will support prices. 

“Even though things are getting back to a relative normal, demand for rural properties with more space is likely to continue to increase, and demand for inner city properties reduce.”