Thursday, November 14, 2024

House prices fall in August, says Nationwide – but are still up compared to last year

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  • Despite the monthly fall, it was the biggest annual rise since December 2022

House prices fell in August, according to the latest figures from Nationwide.

Britain’s biggest building society said that while average prices dropped 0.2 per cent this month, they had increased by 2.4 per cent in the year to August, up from 2.1 per cent in July.

This, it said, was the fastest pace of yearly growth since December 2022.

The last time prices dropped on a monthly basis was in April this year.  

Down and up: House prices fell by 0.2% month-on-month in August, after taking account of seasonal effects, but annual house price growth continued to edge higher

Nationwide said the reason for this statistical quirk – monthly prices falling and yearly prices rising – is that there was also a fall recorded last year between July and August.

Nationwide also uses seasonal adjustment to smooth out months that are typically more and less active in the housing market, and without that adjustment the average fell by 0.36 per cent between July and August this year.

While home values may be up year-on-year, prices are still around 3 per cent below the all-time highs recorded in the summer of 2022.

Robert Gardner, chief economist at Nationwide said: ‘UK house prices fell month-on-month in August, after taking account of seasonal effects, but the annual rate of house price growth continued to edge higher. 

‘While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings.’

What next for house prices?

Most organisations and experts across the property market are now forecasting that prices will finish the year slightly up.

The property portal, Zoopla, predicts house prices will finish the year 2.5 per cent higher.

The property firm Knight Frank is forecasting a 3 per cent shift upwards in annual growth, come December.

Looking further ahead, Knight Frank expects similar growth over the next four years. 

It has forecast a further 3 per cent rise next year, followed by annual growth of between 4 per cent and 5 per cent between 2026 and 2028.

Recent high: Average prices were up 2.4% year-on-year, a slight pickup from the 2.1% recorded in July and the fastest pace since December 2022

Recent high: Average prices were up 2.4% year-on-year, a slight pickup from the 2.1% recorded in July and the fastest pace since December 2022

The slightly more upbeat mood around property prices all stems from the fact that mortgage rates have been moving lower in recent months.

The lowest five-year fixed rates, reserved for those with 40 per cent deposits, are below 4 per cent. Those buying with deposits of 20 per cent can secure a five-year fix as low as 4.19 per cent and those buying with a 10 per cent deposit can secure as low as 4.59 per cent.

Jonathan Hopper, chief executive of Garrington Property Finders said: ‘The summer holidays are traditionally a slow time for both property viewings and offers, but buyer sentiment has been boosted by the growing realisation that we’re at last in an interest rate cutting cycle and that cheaper mortgages are appearing every week.’

Hopper says that prices are heading up in more affordable parts of the country but are still falling in more expensive locations.

He said: ‘On the front line we’re still seeing prices come down in the most expensive parts of London and the South East.

‘By contrast, prices are marching steadily upwards in more affordable locations and this has pushed the Nationwide’s annual rate of price inflation up to levels not seen since 2022.

‘With many buyers now back from holiday and setting themselves the goal of moving by Christmas, demand is likely to notch up markedly over the coming months. But the supply side of the equation should keep price rises in check.

‘With many buyers spoilt for choice and sellers keen to get a deal done, big discounts are still achievable.’

Tom Bill, head of residential research at Knight Frank added, ‘The housing market is in a better place than it was last summer as inflation comes under control and lenders trim their rates. 

‘Financial markets are pricing in another cut this year and as mortgage rates fall this autumn, it should underpin transactions and modest single-digit price growth, which doesn’t necessarily chime with recent Government warnings about the state of the economy.’

How to find a new mortgage

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.

What if I need to remortgage? 

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. 

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people’s borrowing ability and buying power.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you. 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage 

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