November has seen the biggest fall in house prices monthly in more than two years as soaring interest rates have put off buyers.
According to data from Nationwide, prices had fallen by 1.4% in October which was previously the largest month-on-month fall since June 2020.
Nationwide have commented that the housing market looks set to “remain subdued” in the coming months.
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House prices were predicted to fall by 9% over the next two years by the Governments official forecaster. These fall in prices has been accredited to rising affordability issues.
In November, the average property price fell from £263,788 from £268,282 in October, according to Nationwide.
The building society has pointed the finger at the fallout from the September mini budget as the reason behind the falling prices as it triggered a rise in mortgage rates which resulted in lenders suspending hundreds of mortgage products.
Nationwide’s chief economist, Robert Gardner said: “A lot of this reflects the fallout of the mini-budget and the big rise that we saw in mortgage rates, because that really did change the affordability calculations for prospective buyers and really made things a lot less affordable.”
He went on to say: “If you look at the typical mortgage payment as a share of someone’s take-home pay, for the typical first-time buyer that was running at close to long-run averages of 30%. But as a result of the mini-budget it’s moved up to around 45% of take-home pay, which is clearly a massive difference.”
Rising interest rates
As a result of the inflation, Mr Gardner has said that the market will most likely remain under pressure for some time, with prices set to remain high and The Bank Of England likely to raise interest rates further.
This news coming shortly after the Bank of England announced that the number of mortgages approved in October had fallen to its lowest level since June.
Official forecasters are predicting that these falling house prices signal the beginning of two years of house price falls.
Whilst falling prices will bring relief to many first time buyers, the cost of living crisis means that for many it is a struggle to save a deposit. Nationwide also revealed that as a result of these conditions, a larger proportion of people have been priced out of the market and have needed to borrow more money in order to buy a home.
What does this mean?
We spoke to the Editor of Property Press Online for their thoughts on what the falling house prices will mean for the open market.
They told us “The coming months will undoubtedly bring a lot of uncertainty to an already turbulent market. We have not yet seen the full force of the mini budget as the average house sale takes around three months to complete.”
They added, “Whilst the property market is currently very uncertain, there is still chance of a fairly soft landing as employment rates are still going strong and there are fewer properties coming up for sale.”