Key facts
- UK house prices were flat in September, with the average home costing £298,441.
- This marks no change from the previous month and a year earlier.
- Economists had predicted a 0.1% monthly rise and a 0.2% annual increase.
- The average five-year fixed-rate mortgage reached 6% recently.
- Mortgage applications for home purchases fell 18.2% in Q3 year-on-year.
- Applications from first-time buyers dropped 18.6% in Q3 year-on-year.
UK house prices remained unchanged in September, failing to meet economists' expectations for a slight increase. The average home cost £298,441, the same as a year ago and the previous month, according to Lloyds's house price tracker. This flatlining comes after a 0.3% fall in August, which was the first monthly decline in three years, attributed to geopolitical uncertainty, higher mortgage rates, and affordability concerns.
Recent weeks have seen major banks and building societies increase mortgage rates, with the average five-year fixed-rate mortgage reaching 6% for the first time in three years. This trend is driven by changing expectations about future base rate movements, according to Andrew Asaam, mortgages director at Lloyds. He noted that while the market is subdued, prices have shown resilience.
However, the rising borrowing costs, coupled with higher energy bills linked to the Middle East conflict, are contributing to concerns about a new cost of living crisis. Despite economic uncertainty, Asaam reported that new inquiries from prospective buyers have reached their highest level since February, suggesting a potential for modest price movements ahead.
Tom Bill, head of UK residential research at Knight Frank, described the year as one of rising energy prices and stalling house prices, exacerbated by the Middle East conflict and its impact on borrowing costs. He also pointed to the recent budget adding to buyer and seller uncertainty regarding potential tax changes.
Quarterly figures from Stonebridge revealed a significant drop in mortgage applications for property purchases, down 18.2% in the third quarter compared to the previous year. Applications from first-time buyers saw an even steeper decline of 18.6% over the same period. Rising numbers of remortgaging applications, however, helped to mitigate the overall decrease in mortgage activity.