REACTION: Housing market slump drives 30% activity drop says Nationwide

Activity in the housing market plummeted 30% in August, with mortgages slumping well below pre-pandemic figures, according to Nationwide.

New data from the building society reveals just 45,500 mortgages approved, nearly a third down on 2019.

The latest statistics from Nationwide also show house prices unchanged in September, but remaining down 5.3% year on year (£14,500).

All regions recorded annual house price falls in Q3, with the South West the weakest performing region as prices are 6.3% lower year on year.

Activity weak

Robert Gardner, chief economist at Nationwide, says: “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, c.30% below the monthly average prevailing in 2019 before the pandemic struck.

“This relatively subdued picture is not surprising given the more challenging picture for housing affordability,” he says.

“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%.”

Demand for flats

Nationwide says demand for flats is high, as buyers look for less expensive properties.

Average prices for flats have increased by 12% since the start of the pandemic, which is half the 24% increase recorded for detached properties, Nationwide says.

Industry reaction

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Those buyers relying on mortgages are inevitably going to be more price sensitive on the back of ongoing affordability concerns.

“That said, the welcome hold in interest rates at the Bank of England’s September meeting will help buyer confidence, hopeful that the worst is behind us and that if inflation continues to decline, so too will the base rate,” he says.

“Lenders are keen to do business before year-end, which should be reflected in improved mortgage pricing in the final quarter of the year. However, the days of rock-bottom rates are long gone and borrowers need to get used to paying more for their mortgages.”

Tom Bill, head of UK residential research at Knight Frank, says: “Fourteen consecutive rate rises have taken their toll on the property market, but more stable lending conditions means buyers and sellers will be able to catch their breath.

“The number of people rolling off more favourable fixed-rate mortgages won’t fall in 2024, but sentiment should improve as volatility reduces. We think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Although the Nationwide house price index is an historically-reliable indicator of market health, broader economic factors are just as compelling.

“Successive increases in base rate and lender nervousness have meant those with cash have been playing a more significant role now that buyers continue to hold sway,” he says.

“In our offices, we are not seeing talk of a market correction – rather, promising signs of falling mortgage rates, though modest so far are encouraging viewings and helping to keep existing sales alive.”

Tomer Aboody, director of property lender MT Finance, says: “As mortgage rates fluctuate on a daily basis, buyers and sellers are uncertain as to where the market is, which makes for instability and lower transaction volumes.

“With the Bank of England holding rates in September, confidence may start creeping back in, especially if we there is another hold in rates at the next meeting. Mortgages are slightly cheaper, which will hopefully encourage buyers and sellers to act in the final quarter.”

Matt Thompson, head of sales at Chestertons, says: “Since the Bank of England’s announcement of interest rates remaining at 5.25% for the time being, we have seen a positive response from buyers in September who felt more secure to make financial decisions and resume their property search.

“Understandably, buyers who are now entering the market are particularly careful about their budget and factor in any future rate hikes as well as the cost of living. As demand for properties in the capital continues to outstrip supply, the market remains competitive.”

Jason Tebb, CEO at OnTheMarket, says: “With prices remaining flat in September, opportunities are emerging for motivated buyers who want to get on and complete their property purchase this side of Christmas.

“Affordability remains stretched for those relying on mortgages to fund their purchases, but lenders continue to reduce their pricing on the back of dipping swap rates, which over time will help ease the situation,” he says.

Buyers and sellers alike will be hoping that September’s pause in interest rate rises means we have seen the back of consecutive increases, which will boost confidence.”