The UK’s biggest mutual confirmed the marginal drop of 0.6% year-on-year contrasts with a stabilising housing market UK-wide, showing price growth of 2%. This is down from 2.1% in August, with transaction numbers “strengthening a little”” in recent months from a subdued level.
Robert Gardner, Nationwide’s chief economist, said: “Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices.
The National Association of Estate Agents reported home sellers hit a 12-month low in August, with sales to first-time buyers dropping to 23% in August from 30% in June in the traditional summer lull.
Mark Hayward, chief executive, NAEA Propertymark said: “We shouldn’t take August’s decline as a sign of things to come – we’ll see the market bounce back in September and ramp up towards the end of the year as house buyers desperately try to complete transactions before Christmas.”
Interest rate hike
Meanwhile, Nationwide’s Gardner added that, as hinted by bank of England governor Mark Carney, a near-term rate hike is becoming more likely if the economy performs as expected. He said this would bring the first base rate rise since July 2007, although any rises would cap off at 1.25% over the next five years.
Peter Williams, executive director of The Intermediary Mortgage Lenders Association (IMLA) said speculation on an interest rate rise has not interrupted the fall in mortgage rates, boosted by the Term Funding Scheme (TFS). Rates fell on two-, three- and five-year terms.
“With an increase in the base rate now looking increasingly likely and with the rundown of the TFS starting in early 2018, borrowers might want to consider the potential benefits of fixing,” he added.
Nationwide confirmed the number of mortgages on variable rates has fallen to 40% down from a peak of 70% in 2001, which would lessen the cost and impact of a rate rise. For example, on the average mortgage, an increase of 0.25% would increase monthly payments by £15 to £665, or an extra £180 a year.
However, the pressure on the average household is rising, with wage levels still at 2005 levels and many people with high debt burdens to service. The English Housing Survey suggests that around 12% of households already spend over 30% of their gross income on their mortgage each month.
Regional price growth
According to Nationwide, the East Midlands became the top performing region for house price growth in Q3 for the first time since 2002, with a rise of 5.1% year-on-year. London was the only region to see a year-on-year price fall, while Northern Ireland price growth softened from 3.8% the previous quarter to 2.4% and Wales picked up and rose to 2.6%. Annual price growth in Scotland was similar to last quarter at 1.9%.
Northern England saw a 3.2% year-on-year increase, while in the South prices were up 1.9%.
Bank of England mortgage lending data suggests lending held steady at £21.4bn in August. Since the start of the year, secured lending has hovered around the £21bn mark each month, with a brief dip to £20.9bn in June.