Annual growth sits at 0.0% as five-year fixes hit 6% and surveyors report weaker buyer demand
UK house prices were unchanged in September as higher mortgage rates and Budget uncertainty kept buyers cautious, the Lloyds House Price Index showed.
The average property cost £298,441, compared with £298,395 in August, a 0.0% monthly change. Annual growth was also 0.0%, after August's -0.4% marked the first annual fall since November 2023. Prices were down 0.2% over the three months to September.
Nationwide reported annual growth halved to 0.8% from 1.6% in August, with prices down 0.2% on the month to an average £274,251.
Andrew Asaam, mortgages director at Lloyds, said the market is "balancing buyer caution with continued underlying demand," noting that new enquiries from prospective buyers are at their highest since February. He said any price movement is "likely to remain modest."
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Mortgage costs climb
Mortgage pricing has risen sharply. The average two-year fixed rate reached 5.98% on Oct. 5, its highest since December 2023, according to Moneyfactscompare.co.uk, while the average five-year fixed rate hit 6% for the first time in about three years. Fixed deals priced below 5% fell from nearly 1,500 at the start of September to nine.
Barclays raised selected fixed rates four times last month, while HSBC, Lloyds Bank, Nationwide, Santander and TSB each did so three times, Moneyfacts said. Rachel Springall, a finance expert at the site, tied the moves to swap-rate volatility as the conflict in the Middle East pressured oil supplies.
The Bank of England held Bank Rate at 3.75% on Sept. 17, but three of nine Monetary Policy Committee members voted for an increase to 4%. Inflation rose to 3.1% in August, and the next decision is due Nov. 5.
Mortgage Advice Bureau spokesperson Oliver Dack said more remortgage borrowers have sought advice in recent months, adding lenders are "still actively looking to extend loans."
Activity softens
Bank of England figures showed 54,900 mortgage approvals for house purchase in August, the lowest since December 2023. Lloyds said that was 16.0% below a year earlier.
The Royal Institution of Chartered Surveyors (RICS) said Thursday that a net balance of 22% of professionals reported falling new buyer enquiries in September, a weaker reading than August. It cited a renewed rise in interest rate expectations as a "fresh headwind." Its house price balance fell to -32 from -28, Reuters reported.
Regions
Northern Ireland led annual growth at 7.4%, up from 6.8%, with its average price at a record £231,917. Scotland rose 3.4% to £223,330, and Wales 1.2% to £231,287. In England, the North East gained 2.4% and the North West 1.9%. Greater London fell 2.2% to £531,548, followed by the South East at -2.1% (£380,829) and Eastern England at -1.6% (£330,151).
Budget in focus
Chancellor John Healey will deliver the Autumn Budget on Oct. 28. The Government announced its Your First Home scheme in late September, offering first-time buyers of new-build homes in England from participating developers a 2.5% deposit and a 20% equity loan, with details due at the Budget. Lloyds said the average first-time buyer price was £236,779 in September, below February's record of £241,244.
Prime minister Andy Burnham has ruled out changes to stamp duty at this Budget, though he has declined to rule out wider tax rises.
Jeremy Leaf, a north London estate agent and former RICS residential chairman, said: "Prices are holding firm as buyers try to ensure further increases in mortgage costs and inflation are balanced with the unpredictability of fallout from the Iran conflict and seller expectations." He said Budget speculation was prompting pauses for some, but "first-time buyers in particular are likely to turn out to be winners rather than losers."
Tomer Aboody, director of specialist lender MT Finance, said: "With Andy Burnham pointing to further and harsher taxes both on homeowners and landlords, any buyers out there are proceeding with caution."
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said: "Borrowing costs are the main brake." She added: "For the remainder of the year, we expect prices to be broadly flat, with activity picking up modestly if the Budget passes without too many nasty surprises."
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