Robert Gardner says the conditions for recovery are in place, despite growth hitting its weakest pace since January 2024
UK annual house price growth slowed to 0.5% in October – the weakest rate since January 2024 – as geopolitical tensions, rising energy prices, and mounting expectations of further Bank Rate increases continued to weigh on the market, according to the latest House Price Index (HPI) from Nationwide.
Robert Gardner (pictured top), chief economist at Nationwide, told Mortgage Introducer the data reflected a market under meaningful external pressure, but argued the fundamentals remained in place for a recovery once conditions stabilised.
Prices were flat month on month after seasonal adjustment, with Nationwide's monthly index falling marginally from 548.1 to 547.8, following a 0.3% decline in September. The average UK house price stood at £273,566, down from £274,251 the previous month.
"Market activity and house price growth have slowed in recent months, in part reflecting the uncertain economic backdrop," Gardner said. "Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices, fanning inflation concerns."
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Global pressures and domestic headwinds
Gardner said it is difficult to separate the global and domestic drivers of the slowdown, noting the two are deeply intertwined. Higher energy prices – the product of geopolitical events – are dampening sentiment at home, while movements in market interest rates are themselves being shaped by global inflation concerns.
"The movement in market interest rates is driven by those inflation concerns and longer swap rates – the wholesale borrowing rates that underpin fixed mortgage pricing – which have increased because of concerns about inflation as well as global trends that have been dragging up yields around the world," he said. "Those global factors are the dominant ones influencing conditions at the moment."
Forward-looking indicators pointed to further near-term softness. Surveyors reported that new buyer enquiries remained weak, while consumer confidence dipped noticeably in October, according to GfK.
Households grew less optimistic about both the general economic outlook and their own financial situations in the year ahead. Gardner acknowledged the hesitation is understandable, with petrol prices, uncertainty over energy price cap levels and elevated fixed-rate mortgage costs all weighing on households – and said the hope is that improving external conditions would ease those pressures in time.
What does the Bank Rate decision mean for mortgage professionals?
Growing market conviction that the Bank of England will raise Bank Rate at its 5 November meeting formed a key part of the October picture. The Monetary Policy Committee (MPC) held Bank Rate at 3.75% at its September meeting, but the 6–3 vote – with three members backing an immediate rise to 4% – signalled a committee increasingly divided on the direction of travel.
September’s Consumer Prices Index (CPI) data, which came in at 3.5% – higher than most forecasters had anticipated and driven largely by a surge in motor fuel prices, has only strengthened the case for a move next week. That figure marks two full years since inflation was last at or below the Bank’s 2% target, and financial markets are now pricing in four rate rises by June 2027, taking Bank Rate to 4.75%.
Gardner said a November rise is likely given that the economy had held up better than expected – with annual economic growth having accelerated in recent quarters – and the labour market remaining resilient. Mortgage professionals watching swap rates may find the practical implications of such a move more limited than they initially appear, however.
Gardner noted that a rise would not materially affect fixed-rate pricing, since swap markets had already absorbed the expectation. "That change by itself shouldn't have much of an impact on fixed-rate mortgage lending because financial markets – those five and two-year swap rates – already embed the expectation that Bank Rate will increase in November anyway," he said. "The immediate impact on swap rates should be fairly modest." Variable-rate products would be more directly affected, he added, but the quarter-point move itself remained relatively modest in isolation.
The underlying case for optimism
Despite the current softness, Gardner pointed to a set of fundamentals he said positioned the market well once external conditions improved. Employment is holding up strongly, with the unemployment rate having ticked down to 4.7% in recent months. Real incomes continued to grow, and household debt levels remained close to 20-year lows relative to disposable income – a position Gardner described as well placed to support a recovery.
Crucially, he noted that housing affordability has improved significantly over the past two years, as income growth has outpaced house price growth by a wide margin, and that this improvement has only been partially unwound by the recent rise in mortgage rates. "Despite the increase in mortgage rates, it's only partially unwound the gains that were made over the last few years because house prices have been that much slower than income growth over that period," he said.
The availability of higher loan-to-value (LTV) and higher loan-to-income (LTI) lending has also improved in recent years, giving first-time buyers additional routes into the market when confidence returned. The housing market itself remains relatively balanced, with any shift in the stock of available properties moving only modestly in favour of buyers – a factor Gardner said explained why the market is seeing a gradual moderation in growth rather than a sharper correction.
What should brokers be telling clients right now?
Brokers working with clients weighing up whether to act now or wait for conditions to improve will find little comfort in attempts to time the market, Gardner suggested. "By its nature, we don't know when this uncertainty is going to end,” he said. “Timing the market is very difficult, if not impossible, to predict, just because the uncertainty is so high."
His counsel is for advice to remain grounded in individual client circumstances rather than broader market calls. "The advice is always to be mindful of people's own circumstances. That's got to be the main driver."
On the broader outlook, Gardner's closing view was measured but optimistic. "The fundamentals are there for a recovery once this uncertainty starts to fade," he said. "Hopefully we'll see that broader backdrop start to stabilise in the coming quarters, and then we'll see that recovery coming through."
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