House Price Growth and Borrowing Costs
UK house prices grew by an annual rate of 0.5% in October, marking the slowest pace in more than two years. According to Nationwide, the average property price stood at £273,566, flat compared with the previous month and down from 0.8% in the year to September. The slowdown coincides with rising borrowing costs, as the average cost of a five-year fixed-rate mortgage reached the 6% barrier for the first time in three years. Moneyfacts reported the average five-year rate at 5.99% on Thursday, with the average two-year rate at 5.97%.
Market Outlook and Policy Expectations
While the Bank of England has kept its base rate at 3.75%, expectations are growing that the monetary policy committee will vote to increase the rate to 4%. Nationwide chief economist Robert Gardner said Middle East conflict concerns had driven up inflation expectations and interest rate forecasts, with property prices likely to fall further amid weak buyer inquiries and falling consumer sentiment. Knight Frank head of UK residential research Tom Bill noted that rising mortgage costs eclipse support from the government's newly confirmed £4.7bn Your First Home scheme.