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UK house prices beat forecasts to rise again in November

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UK house prices unexpectedly rose again in November, according to data that provides further evidence of stabilisation in the property market as high mortgage rates ease. 

House prices grew 0.2 per cent between October and November, mortgage provider Nationwide said on Friday. The increase follows a 0.9 per cent expansion in the previous month and a marginal rise in September. Economists polled by Reuters had forecast a 0.4 per cent fall. 

The Nationwide house price index provides a timely indicator of the property market, which affects the wider economy via house-related spending. Official data on November prices will be published in January.

After separate Bank of England figures this week showed mortgage approvals hit an unexpected three-month high in October, Friday’s data suggests an easing in the housing market after a slide in prices and sales since the summer of 2022.

Robert Gardner, Nationwide’s chief economist, said the data for November remained “weak” compared with this time last year. But he noted “a significant change” in market expectations for the future path of interest rates, “which, if sustained, could provide much-needed support for housing market activity”.

Column chart of Annual % change showing UK house price recovery continued in November

In the summer, financial markets were pricing in a peak BoE interest rate of 6 per cent. But they now widely expect borrowing costs to go no higher than the current level of 5.25 per cent, and are pricing in rate cuts from next year.

This has helped reduce the rates on popular mortgage deals. BoE data on Wednesday showed that the two-year fixed mortgage rates with 60 per cent loan-to-value eased from 6.2 per cent in July to 5.5 per cent in October.

Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management, a wealth advisory firm based in St Albans, said: “The rate war that is raging between lenders is now really starting to ignite demand for property.”

Last month, house prices were 2 per cent down from November last year. That was a smaller contraction than the 3.3 per cent in October, and the lowest annual drop in nine months, Nationwide said. The average house price was £258,600 in November, down from a peak of 273,500 in August last year.

Charles Breen, director at Montgomery Financial, a Wellingborough-based independent mortgage broker, said the data showed the market “has definitely reached the bottom now and it’s the ideal time to either buy or start getting ready to buy”.

Andrew Wishart, property economist at the consultancy Capital Economics, said he now expected only a 2 per cent annual fall in prices in the last three months of 2023, compared with the 7 per cent he forecast at the start of the year.

He said he expected a modest price contraction in 2024 but acknowledged “that these data suggest that house prices may surprise forecasters to the upside again in 2024”.

A scarcity of properties for sale and still strong wage growth are also supporting house prices and could help a recovery in transactions in the months ahead.

Gardner said that, while mortgage rates were unlikely to return to their lows in the wake of the pandemic, “modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead”.

Separately, the Office for National Statistics on Friday revised upwards the annual rate of UK rental prices in October from 6.1 per cent to 8.4 per cent, the highest since data collection began in 2016.

The agency said a new methodology for calculating rental price growth showed it hit 10 per cent in London in the year to October, compared with a previous estimate of 6.8 per cent.

Rental demand and prices have been boosted by households not being able to afford mortgage payments and by landlords passing on higher borrowing costs to tenants.

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