Housing demand is being tested by a “challenging economic backdrop” with conditions “likely to remain subdued in the near term” according to Lloyds in their October House Price Index ,
Following the Bank of England’s decision to increase interest rates to 4% last week director of mortgages at the bank Andrew Asaam added: “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.”
But, more positively, with wages continuing to rise faster than property prices, the gap between earnings and house prices should gradually narrow, helping affordability to improve over time he concluded.
The bank said UK house prices fell by -0.6% in October, a larger drop than in recent months, following a -0.1% decrease in September.
The average property price is now £296,285, compared to £298,167 in September. Prices were also -1.2% lower than a year ago, the biggest annual fall since October 2023.
Nicky Stevenson, managing director of Fine & Country, said Octobers dip was “understandable” but advised a cooling market “should not be mistaken for a lack of activity”.
She said: “Buyers are still motivated to move, but they are taking a more considered approach to their finances and long-term affordability.
“Understanding what they can comfortably borrow, with guidance from a qualified mortgage professional, is particularly important in the current climate.
“While the latest figures point to a more subdued market, there are still reasons for optimism.
“Employment remains relatively stable, real incomes have improved and price adjustments in recent years have helped restore some balance between buyers and sellers.
“The housing market has demonstrated resilience despite wider economic uncertainty, and what we are seeing a more cautious and price-sensitive market, rather than one that has ground to a halt.”
Meanwhile Iain McKenzie, CEO of The Guild of Property Professionals, urged the latest figures are a “wake-up call” for sellers who are still pricing their homes based on what they might have achieved at the height of the market.
“Buyers have more choice, borrowing costs are squeezing budgets and overpriced properties are finding it increasingly difficult to attract serious interest,” McKenzie said.
“With housing stock elevated, competition between sellers is intensifying.”
He added: “National house price figures only tell part of the story. Demand, supply and affordability vary considerably from one area to another, and well-presented homes in desirable locations can still perform strongly.
“The market remains active, but sellers can no longer take buyer interest for granted. Realistic pricing is increasingly the difference between securing a sale and watching a property stagnate.”
Jason Tebb, president of OnTheMarket, looked to the future as interest rates are expected to increase further: “Despite higher mortgage costs, the market continues to demonstrate resilience.
“The Bank of England’s decision to raise interest rates after opting for a hold for so long had already been priced in by mortgage lenders. But with further rate increases expected if inflation continues to rise, this will inevitably result in higher borrowing costs and challenge affordability going forward.
“Serious buyers and sellers continue to engage with each other but with the former having potentially less purchasing power after yesterday’s announcement, the sensible pricing of property coming to market is crucial.”
Despite uncertainty within the property market, the latest Budget raised some hopes, Nathan Emerson, CEO of Propertymark said.
“The decision to broaden the ‘Your First Home’ scheme is an encouraging development,” he said, “potentially making homeownership accessible to more people across England and easing some of the financial barriers associated with buying a first property.”
He added: “Nevertheless, renewed inflationary concerns and yesterday’s increase in the base rate will continue to weigh on consumer confidence, particularly as households remain mindful of the cost of living.
“As a result, many buyers may take a more measured approach over the coming months, carefully considering their financial position before committing to a house move.”
