UK house prices post sharpest fall since May as borrowing costs rise

UK house prices recorded their sharpest monthly decline since May in September, as rising mortgage costs and pressure on household budgets weighed on the housing market.

Average home prices fell 0.2% to £274,251 ($363,523), according to Nationwide Building Society figures. Economists had expected prices to remain unchanged.

The decline was the fourth in five months and the second-largest monthly fall this year, following a 0.6% decrease in May as prospective buyers began feeling the effects of the Middle East conflict.

The latest figures followed a modest recovery in August, when Nationwide reported a 0.2% monthly increase and annual price growth of 1.6%. The average property price that month stood at £275,465.

Mortgage rates approaching 6% are putting renewed pressure on demand, Bloomberg reported. Households also face higher energy bills from Thursday, with a further increase expected in January, potentially reducing the money available for deposits and mortgage repayments.

Savings accumulated by households and the government’s summer cost-of-living measures had helped support the market earlier in the year, according to the report.

In its August assessment, Nationwide said geopolitical uncertainty and the Middle East conflict were pushing up energy prices and market interest rates, contributing to subdued housing activity.

The lender said affordability had been improving because earnings were growing faster than house prices, although higher mortgage rates had offset some of those gains.

Nationwide’s chief economist, Robert Gardner, said a recovery in activity would depend on the energy shock easing and confidence returning, particularly if market interest rates moved back toward their levels before the conflict.