UK house prices grew by an annual rate of just 0.5% in October, the slowest pace in more than two years, as higher mortgage costs put off potential buyers, according to the lender Nationwide.
The average price for a property in the UK stood at £273,566 in October. That was flat on the previous month, and down from annual growth of 0.8% in the year to September, the Guardian reported.
Borrowing has become markedly more expensive. This month the average cost of a five-year fixed-rate mortgage passed the 6% barrier for the first time in three years, and stood at 5.99% on Thursday, according to the financial information provider Moneyfacts. The average two-year rate was not far behind at 5.97%.
The Bank of England's key interest rate has been on hold at 3.75% since last December, but volatility in the bond market has driven up the swap rates that influence the pricing of fixed-rate deals. Expectations are growing that the monetary policy committee will vote next week to raise the rate to 4%, which would be the first increase in three years.
Robert Gardner, the chief economist at Nationwide, said property prices were likely to fall further. "Surveyors report that new buyer inquiries remain weak," he said. "Consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead."
Tom Bill, the head of UK residential research at Knight Frank, said the impact of rising mortgage costs "eclipses any support measure announced in this week's budget". He added: "The absence of major shocks from the chancellor may produce a modest relief bounce in coming months. However, asking prices will need to reflect the much tougher financial landscape that buyers face."
This week the chancellor, John Healey, confirmed the government's new £4.7bn Your First Home scheme, designed to help first-time buyers who do not have access to the "bank of mum and dad".
Rob Wood, the chief UK economist at the consultancy Pantheon Macroeconomics, said the scheme could provide a "modest boost" to the market, but that prices were likely to remain subdued next year.
Two of the month's figures deserve to be read together, because they are both from Nationwide and both about October. Over the year to October, the average UK house gained 0.5%. Over the month of October, it gained nothing.
Each figure is a comparison. The annual number compares two months twelve apart. The monthly number compares two months one apart. Both are accurate. Neither contains the other.
This newspaper has therefore been obliged to ask where the 0.5% went. It is not in October, which was flat. It is not, on Nationwide's own account, in the months ahead, which are expected to fall. It is somewhere in the middle distance, among months that were reported at the time and found to be quiet.
Our analysts have settled on the only available explanation. British house prices no longer rise in any particular month. They rise in aggregate, retrospectively, across a period that always sits just behind the most recent set of figures.
There are advantages to this. A market that appreciates only in the past cannot be mistimed, cannot be entered at the wrong moment and cannot disappoint, because by the time any month has been confirmed to have risen it is no longer available to buy into.
It also resolves the mortgage question elegantly. A five-year fixed rate of 5.99% is charged in the present, where prices are flat. The 0.5% is earned in the recent past, where no payments are due.
The average property is now worth £273,566, and was worth £273,566 a month ago. The Department of Unnecessary Research accepts that it is nevertheless worth 0.5% more than it was, and has begun working backwards to establish when.