Mortgage costs continue to squeeze homebuying demand, UK house price growth stalls

According to information from Zhihu Finance APP, Nationwide Building Society, one of the UK’s largest mortgage providers, stated that surging mortgage costs have squeezed potential homebuyers, resulting in UK house prices failing to grow in October. Nationwide Building Society said on Friday that the average UK house price in October was virtually unchanged at £273,566 (approximately $366,540), after a 0.3% decline in September. Economists had previously expected house prices in October to fall by 0.2%.

The Middle East conflict shattered market expectations for rate cuts and pushed up borrowing costs, which has since put pressure on the UK property market. Major mortgage interest rates have recently risen to 6%, up from 4.8% before the outbreak of the conflict, causing prospective homebuyers to delay their property search. Nationwide stated that house prices in October were only 0.5% higher than a year earlier, marking the slowest year-on-year increase since January 2024.

UK house prices are facing downward pressure

Nationwide's Chief Economist, Robert Gardner, said: “In recent months, both housing market activity and price growth have slowed, partly reflecting uncertainty in the economic environment.” He added that inflation concerns triggered by energy shocks have meant “financial market expectations of rate hikes by the Bank of England have continued to rise, keeping market rates underpinning mortgage pricing under sustained upward pressure.”

This report further confirms that potential homebuyers are under strain. According to data from the Bank of England, demand for home loans has fallen to its lowest level since December 2023. Official figures from the Office for National Statistics show that house prices declined for the third consecutive month in August.

In the short term, demand for home purchases is expected to remain subdued. Property survey institutions report that concerns over rising borrowing costs are prompting buyers to temporarily exit the market. Bank of England officials are expected to raise rates at the meeting next week to tackle inflationary pressure triggered by the Middle East conflict.

Meanwhile, rising energy and fuel prices are also putting increasing pressure on households, with consumer confidence plummeting sharply in October.

UK mortgage rates rise to 6%, homebuyers under pressure

Tom Bill, Head of UK Residential Research at Knight Frank, said: “The impact of the Middle East conflict on the UK property market is becoming increasingly apparent over time.” He pointed out: “The effects of rising mortgage costs have outweighed any supportive measures announced in the Chancellor's budget this week. However, the absence of any major surprise measures by the Chancellor may allow for some degree of market rebound in the coming months.”