The house prices reported by Nationwide have declined in every region of the UK. The average house price in September 2023 is 5.3% less than the same month last year. The house price index in August revealed a 0.8% fall. At almost £14,500 less, the average house price reported by Nationwide is £257,808. The average house price decline could be a strong indicator that the housing market might not have faired well had another hike been applied to the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPC).

The MPC had increased the base interest rate during fourteen consecutive meetings since December 2021, but in September the majority vote was for the rate to remain steady at 5.25%. The expectation had been for an increase of 0.25%, which did not occur. Had it happened, perhaps a greater decline in the average house price would be reported for October. 

All in all, with the rate remaining steady and lenders content at the easing in risk of lending enough so to lower their own interest rate offers, perhaps the market will show the resilience observed in the past few years. The outlook for hopeful home buyers could become more optimistic in the months leading up to the holiday season because it normally is a period when the market sees a jump in sales.

A resilient housing market is a hopeful thought for homeowners on the brink of going into negative equity, for with declining house prices often property owners experience a decline in property value. Negative equity would lock homeowners out of the ability to remortgage for a lower and more stable fixed rate deal and instead would be moved by their lender to the higher level and riskier standard variable rate (SVR). It could cause a great number of homeowners to go into arrears and has been a concern of experts. 

The MPC has not ruled out another rate hike if needed, but there are those, including the Bank’s governor, that have noted the current rate could be the peak level needed to keep inflation on a downward trend toward the target rate of 2.0%. The inflation rate reported in September was at 6.7%.

The resistance of the MPC to raise the rate which has empowered lenders to cut their rates, is good news for borrowers, especially homeowners coming to the end of their mortgage terms. It will put in front of them better remortgage interest rates than would likely have been available had the MPC raised the rate in September. 

Hopeful home buyers, however, will be more in conflict as to whether to buy or step back from the market. In fact, the consideration as to whether to buy or not might not be an option for many as affordability is likely shutting out many buyers, especially first-time home buyers. 

It is expected the market has been sustained in the last few months by cash buyers that were not impacted by the rising interest rates. 

In support of the data released by Nationwide, Robert Gardner, chief economist of Nationwide, remarked, “This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment, well above the long run average of 29%.”

Mr. Gardner also remarked the housing market is likely to remain subdued throughout the rest of the year as the third quarter months of the year realized a house price decline in every region of the country. The steepest decline of 6.3% for the quarter was found in the south-west region of England, and six of thirteen regions had a decline of more than 5%. Northern Ireland had the smallest decline in the average house price for the third quarter at only 1.8%.