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House prices in Britain unexpectedly rose last month, supported by a lack of homes for sale, according to mortgage lender Nationwide.
According to data published on Tuesday, house prices rose 0.9 percent between September and October, the first monthly increase since April and the biggest since March 2022. Economists polled by Reuters had forecast a 0.4 percent decline.
House prices were still 3.3 percent lower than in October last year, but that was smaller than the 5.3 percent annual contraction recorded in September 2023.
Robert Gardner, Nationwide’s chief economist, said the October increase most likely reflected the “constrained” supply of property on the market. But he added that there was little sign of foreclosure, “as labor market conditions are solid and mortgage arrears are at historically low levels”.
House prices influence the broader economy because they determine consumer confidence and drive spending on home-related goods and services, such as furniture and carpeting. They have been in a downward trend over the past year, due to conflicting pressures.
Strong wage growth and a shortage of properties have supported prices, pushing the average housing stock per surveyor to a near-record low, according to the Royal Institution of Chartered Surveyors, a professional body. At the same time, higher mortgage payments have led to a decline in prices over the past twelve months.
Nationwide said the average house price in October was £259,423, down from a peak of £273,751 recorded in August last year. Despite the price increase in October, housing market activity has “remained extremely weak,” Gardner said.
![Line chart of the average house price, £'000, showing that house prices in Britain rose in October but are still lower than a year ago](https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2F743df250-788e-11ee-870c-fd48def46ca7-standard.png?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1)
Mortgage payments have risen following the Bank of England’s sharp rate hike, from an all-time low of 0.1 percent in November 2021 to 5.25 percent now, in a bid to curb inflation. Financial markets expect the central bank’s Monetary Policy Committee to leave interest rates unchanged at its meeting on Thursday.
Separate data published by the BoE on Monday showed mortgage approvals in September fell to the lowest level since the start of this year, with average mortgage rates reaching 5 percent for the first time since the 2008-2009 financial crisis.
Most real estate analysts expect further weakness in the coming months due to higher financing costs.
“Activity and house prices are likely to remain subdued in coming quarters,” Gardner said, adding that consumer confidence remained weak and surveyors continued to report low numbers of new buyers despite easing pressure on living costs.
Tom Bill, head of UK housing research at estate agency Knight Frank, said he expected house prices to fall by 7 percent this year and 4 percent next year “as inflation comes under control and mortgage rates stabilise”.
Imogen Pattison, economist at the consultancy Capital Economics, predicts a further 5.5 percent drop in house prices in the coming months, bringing the peak-to-trough fall to 10 percent.
“While some buyers are able to accept higher mortgage payments, which continues to push up house prices, their numbers are declining, as evidenced by the decline in mortgage applications in September,” she said.