House price growth halves to 0.8 per cent, says Nationwide

Annual house price growth in the UK halved in September to its weakest rate since the end of last year, according to the Nationwide Building Society.

Prices were 0.8 per cent higher than a year earlier, down from annual growth of 1.6 per cent in August. Prices fell by 0.2 per cent during the month after taking account of seasonal effects, the fourth monthly fall in five months.

The average price of a home recorded by Nationwide slipped to 274,251 pounds, from 275,465 pounds in August.

Regional differences

Northern Ireland remained the strongest performing part of the UK, with prices up 5.9 per cent in the year to the third quarter. The North West of England also saw solid growth of 3.9 per cent. At the other end of the table, East Anglia was the weakest region, with prices down 0.7 per cent on a year earlier, and prices in southern England were broadly flat or slightly lower.

By type of property, terraced homes saw the strongest growth, up 1.8 per cent, while the price of flats was essentially unchanged on a year ago.

Why the market is slowing

Higher mortgage costs are a big part of the explanation. Although the Bank of England has held its base rate, lenders have raised some fixed mortgage rates because markets expect interest rates to stay higher for longer while inflation is pushed up by energy prices. That reduces how much buyers can afford to borrow.

Many buyers and sellers are also holding back. Estate agents say there are more homes on the market than serious buyers in many areas, which puts pressure on asking prices.

Jeremy Leaf, a London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said demand had "improved slowly over the last three to four weeks", describing the market as cooling rather than collapsing.

What it means for Birmingham

Official figures from the Office for National Statistics, which are based on completed sales, show that prices in Birmingham have been holding up better than the national picture. The average price in the city was 234,000 pounds in July, up 2.5 per cent in a year, with semi-detached houses rising fastest and flat prices broadly unchanged.

Different indices, different numbers

Nationwide's index is based on mortgage approvals at the building society, so it gives an early picture of the market. The official UK House Price Index uses Land Registry data on completed sales, which takes longer to compile but covers all transactions, including cash purchases. The two measures can differ, especially when the market is changing direction.

Good news for first-time buyers?

Slower price growth can help first-time buyers, whose wages may now be rising faster than house prices. The Government has also announced a new Your First Home scheme to support deposits of 2.5 per cent on new-build homes, with details due in the Budget on 28 October.

However, higher borrowing costs mean monthly repayments remain a stretch for many people, and saving a deposit is still the biggest hurdle for younger buyers.

What happens next

Most forecasters expect house prices to grow only slowly over the coming year. Much will depend on what happens to inflation and interest rates, and on any measures announced in the Budget. The Bank of England's next interest rate decision is due on 5 November.