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London house prices still falling, but more slowly, Nationwide House Price Index says

The decline in London house prices slowed in the three months to the end of September, according to the Nationwide Building Society (Dominic Lipinski/PA) (PA Archive)
The decline in London house prices slowed in the three months to the end of September, according to the Nationwide Building Society (Dominic Lipinski/PA) (PA Archive)

The decline in London house prices slowed in the three months to the end of September, according to the Nationwide Building Society, in the latest sign that the capital’s housing market may be unusually resilient to the recent rises in interest rates.

Nationwide’s House Price Index found that house prices in London declined by 3.8% year-on-year to £514,325 in the third quarter of 2023. But that is a more gentle decline than in the second quarter, when prices were down 4.3%.

The slower decline comes in a quarter where fixed mortgage rates peaked at 15-year highs, before they started to come back down. In early August, the average five-year fixed deal carried an interest rate of 6.38%, according to Moneyfacts, but by the end ofSeptember this figure was below 6%.

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Next quarter, there may be a possibility for further slowing, as house prices were hit by fast-rising mortgage rates after the mini-Budget at the end of 2022 and declined rapidly. Some of these declines would come out of the comparative figures next quarter.

Robert Gardner, Nationwide’s Chief Economist, said:”Investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening.

“This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing (see chart below). If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”

House price declines were still accelerating in most other regions, but they were also slowing in the North and North West.

Across the UK, the average house price fell by 5.3% year-on-year, the same as in August, after remaining flat month-on-month at £257,808. Economists had expected a further 0.4% monthly decline, but house prices continue to be reasonably resilient to the impact of higher interest rates.

Mortgage holders got some good news last month when the Bank of England paused its cycle of 14 consecutive rate hikes. City traders still think one more hike before the end of the year is more likely than not, but do price in a strong possibility that rates have already peaked.

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.”