UK house prices unexpectedly rise in October as interest rates steady
UK house prices surprisingly increased in October as a shortage of properties lifted values. It was the largest jump since March last year.
Average house prices rose by 0.9% month-on-month — compared to forecasts of a 0.4% monthly fall — and were up 4.8% year-on-year, according to Nationwide.
The average property sold rose to £259,423, up from £257,808 in September.
However, prices are still 3.3% lower compared to October 2022. But this was a softer fall than September's 5.3% annual drop.
“This is not surprising as affordability remains stretched. Market interest rates, which underpin mortgage pricing, have moderated somewhat but they are still well above the lows prevailing in 2021,” Robert Gardner, Nationwide’s chief economist, said.
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“The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained. There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.”
He added: “Activity and house prices are likely to remain subdued in the coming quarters.”
This was echoed by Marc von Grundherr, director of Benham and Reeves, who said: “It really remains a case of ‘nothing to see here’ when it comes to the current performance of the UK property market.
“With the countdown to Christmas now on, the likelihood is that the market will remain in a state of house price limbo until January, at which point the usual uptick in activity should help spark some life back into proceedings.”
Martin Beck, chief economic adviser to forecasters the EY ITEM Club, said: “The EY ITEM Club thinks the outlook for house prices is still pointing down. Housing market activity has been weak, with mortgage lending and approvals running at unusually low levels.”
Read more: UK mortgage approvals fall to lowest since January as rate hikes bite
It comes as the Bank of England (BoE) is set to make another decision on UK interest rates on Thursday. Threadneedle Street is expected to leave the Bank Rate on hold for a second meeting in a row, with investors expecting no rate cuts until the second half of next year.
The latest figures from the central bank showed that just 43,300 mortgages were approved for house purchase in September, around 30% below the monthly average prevailing in 2019. This was the lowest number since January.
Guy Gittins, CEO of Foxtons, said: “All eyes will be on the Bank of England this week and the latest decision with regard to the base rate.
“A decision to hold, or even reduce, interest rates is unlikely to generate a dramatic uplift in market activity, especially with Christmas fast approaching, but it will add confidence to the market ahead of January.”
Watch: Will UK house prices ever fall?
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