UK house price growth slows to 0.8% as mortgage rates rise

UK house prices rose 0.8% in the year to September, Nationwide reported. That was half the 1.6% annual increase recorded in August and the slowest growth since December last year.

The average British home cost £274,251, while prices fell 0.2% month on month after seasonal adjustment.

Mortgage rates rise above 5.9%

Uncertainty linked to the conflict in the Middle East, along with disruption to regional oil and gas flows, has increased concerns over inflation and energy costs. That has pushed up market rates underpinning mortgage pricing.

Moneyfacts said the average two-year fixed mortgage rate had reached its highest level since July 2024, while the average five-year fixed rate was at its highest since October 2023. Both were above 5.9%.

Regional price differences

Investors are pricing in a 92% chance that the Bank of England will raise its rate from 3.75% to 4% at its 5 November meeting. Markets also expect at least three further increases in 2027, taking the rate to 4.75% by year-end.

East Anglia recorded the sharpest regional decline, with prices down 0.7% annually. Northern Ireland was the exception, posting annual growth of 5.9%.

Nationwide chief economist Robert Gardner said affordability was improving for some buyers because house prices had grown more slowly than earnings for an extended period. He said activity could recover if the energy shock fades, confidence returns and market rates fall back to pre-conflict levels.

First-home scheme details

Prospective buyers are also preparing for the launch of the government’s Your First Home scheme. It will provide a government-backed equity loan worth 20% of the purchase price, while buyers will need a minimum 2.5% deposit and a standard mortgage covering 77.5% of the property’s value.

The scheme applies only in England and to new-build flats and houses. News of its launch lifted shares in housebuilders including Persimmon, Barratt Redrow, Taylor Wimpey, Crest Nicholson and Vistry.