Annual house price growth eased to 2.1% in August, down from 2.4% in July, according to the latest Nationwide House Price Index.
Prices slipped by 0.1% month on month, reversing the 0.5% rise seen the previous month. The average UK house price now stands at £271,079.
Robert Gardner, Nationwide’s chief economist, said: “The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms.
House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.”
“THe added that mortgage servicing costs continue to weigh heavily, with an average earner buying a typical first-time buyer home facing repayments equivalent to around 35% of take-home pay, above the long-run average of 30%. Gardner said affordability should improve if wage growth continues to outstrip house price growth and borrowing costs ease further.
Nationwide’s latest research also highlights changes in the housing stock. Average property sizes in England have risen slightly over the past decade, with terraced houses increasing in average floor area by 3.6% since 2013, while flats have become smaller. More than half of owner-occupied homes are now classified as underoccupied, with two or more spare bedrooms.
Karen Noye, mortgage spokesperson at Quilter, said affordability constraints are still the defining factor. “While the housing market has remained fairly resilient during the usual summer lull, affordability pressures are still weighing heavily,” she said.
Noye pointed to last week’s transaction figures showing steady buyer demand, but warned that stubborn inflation is complicating the outlook for interest rates. She added that speculation over reforms in the Chancellor’s budget could further unsettle sellers and buyers.
Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that five Bank of England rate cuts have supported affordability, though volatility in swap rates means lenders are adjusting pricing in different directions.
“While mortgage rates will always bounce around, we are not expecting any significant reductions or increases in the short term,” he said.
Tomer Aboody, director of specialist lender MT Finance, said stretched buyers face not only borrowing costs but also high stamp duty and inflation. He urged the government to consider a review of stamp duty to support buyers and stimulate the wider economy.
