Annual UK house price growth slowed sharply in September, while prices also edged lower on a monthly basis as economic uncertainty and higher borrowing costs weighed on the housing market.

Nationwide’s latest house price index showed annual growth of 0.8%, down from 1.6% in August and the weakest reading since December 2025.

Prices fell by a seasonally adjusted 0.2% during September, reversing August’s 0.2% increase. The average UK house price, on a non-seasonally adjusted basis, stood at £274,251, compared with £275,465 a month earlier.

Robert Gardner, chief economist at Nationwide, said subdued activity partly reflected uncertainty over the economic outlook, with geopolitical tensions and higher energy prices adding to inflation concerns and putting upward pressure on market interest rates.

He said: “Nevertheless, there have been encouraging signs that higher energy prices are not feeding through to underlying price pressures.

“In particular, private sector wage growth has remained modest, which should give policymakers breathing space to assess the extent to which tighter policy is necessary to ensure inflation returns sustainably to target.

“Underlying affordability is improving, as house price growth has been well below earnings growth for some time. These gains have been only partially offset by higher mortgage rates.”

NORTH-SOUTH DIVIDE WIDENS

Nationwide’s regional figures for the third quarter showed a broad slowdown, with eight of the 13 regions recording annual growth of less than 1% and four posting outright falls.

Northern Ireland remained the strongest-performing region, with prices rising 5.9% year on year, although this was down from 8.6% in the second quarter. The North West was the strongest region in England, maintaining annual growth of 3.9%.

Scotland and the North both recorded growth of 3.3%, while Yorkshire and the Humber posted a 1.2% increase.

England as a whole recorded annual growth of 0.5%. Average prices across Northern England rose 1.6%, compared with a 0.1% decline across Southern England.

London was the only southern region to record an annual increase, at 0.4%. East Anglia was the weakest-performing UK region, with prices falling 0.7%, followed by the East Midlands, where they declined 0.5%, and the South West, down 0.3%.

TERRACED HOMES LEAD PROPERTY TYPES

Growth also slowed across every property type during the third quarter. Terraced houses performed most strongly, with prices 1.8% higher than a year earlier, while flat prices were broadly unchanged.

The longer-term gap between flats and other types of housing remains substantial. Nationwide said the price of a typical flat had risen 14% since the beginning of 2020, compared with a 31% increase for semi-detached homes.

Gardner attributed some of that difference to regional trends, with London’s relatively high concentration of flats coinciding with weaker price performance in the capital compared with the wider UK.

BUYERS REMAIN CAUTIOUS

Karen Noye, mortgage specialist at Quilter, said: “Annual house price growth halved to 0.8% in September from 1.6% in August, while prices fell by 0.2% over the month, taking the average house price to £274,251. These figures show that many would-be movers are taking a wait-and-see approach.

“For now, the market feels less constrained by a lack of demand and more by a lack of confidence. Buyers are looking for certainty on inflation, mortgage costs and government policy before taking the plunge, while sellers are having to adjust to a market where purchasers are becoming increasingly selective.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “A dip in annual house price growth indicates that buyers are not willing or able to pay over-the-odds but are taking advantage of a market in their favour and negotiating accordingly.

“Lenders mostly continue to edge up their mortgage rates, while the Bank of England’s steady approach to interest rates is holding for now, although inflationary risks persist.

“Borrowers are taking nothing for granted though as the continued high cost of living strains affordability. Many are taking the sensible approach of locking into mortgage rates several months before they need them for peace of mind.”

Tomer Aboody, founding director of specialist lender MT Finance, said: “Nationwide’s data points to a housing market which continues to soften.

“With the prospect of more taxation on the way in the budget, understandably buyers and sellers are reluctant to make a move unless it is essential.”