UK house prices were unchanged in September as higher mortgage rates and economic uncertainty continued to restrain the market.
The average property price stood at £298,441, according to the latest Lloyds House Price Index.
Prices were flat month-on-month following a 0.3% fall in August. They were also unchanged compared with September last year.
On a quarterly basis, prices slipped 0.2%.
Despite the subdued headline figures, Lloyds reported signs of improving buyer interest. New enquiries from prospective purchasers have reached their highest level since February.
Buyer demand shows signs of life
Andrew Asaam, mortgages director at Lloyds, said: “While the market overall has been fairly subdued, property prices have so far proved resilient during a period of higher mortgage rates, which has been driven by changing expectations around the future path of Base Rate.”
He said the market was balancing buyer caution against continued underlying demand.
Asaam added: “While higher mortgage rates and wider economic uncertainty are encouraging some people to take a more measured approach, new enquiries from prospective buyers are now at their highest since February.
“That should help sustain activity in the near term, with any movement in house prices likely to remain modest.”
‘Market has lost momentum’
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said borrowing costs remained the biggest constraint.
“The market has lost a bit of momentum as we head into the final quarter of the year. Annual price growth has slowed to a crawl, and mortgage approvals are well down on a year ago. Buyers are still out there, but they’re being careful.
“Borrowing costs are the main brake. The base rate has held steady at 3.75%, and fixed mortgage rates have stayed stubbornly high because lenders are pricing in rates staying higher for longer.”
Reynolds also pointed to uncertainty surrounding the Budget.
“For the remainder of the year, we expect prices to be broadly flat, with activity picking up modestly if the Budget passes without too many nasty surprises,” she added.
Buyers test seller expectations
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said buyers were adapting their offers to changing market conditions.
“Prices are holding firm as buyers try to ensure further increases in mortgage costs and inflation are balanced with the unpredictability of fallout from the Iran conflict and seller expectations.
“Bearing in mind approximately four out of five sellers are buyers, only those who recognise the genuine reasons behind often cheeky offers and adopt a similar approach to their onward purchases are mostly successful.”
Leaf said Budget speculation was prompting some buyers to pause. However, he suggested first-time buyers could ultimately benefit from measures announced later this month.
Mortgage payment shock looms
Mark Harris, chief executive of mortgage broker SPF Private Clients, said higher household costs and mortgage rates were giving buyers reasons to delay.
“The high cost of fuel and rising energy bills, combined with uncertainty surrounding the upcoming Budget, as well as the prospect of higher mortgage payments, are all giving buyers reason to pause,” he said.
Harris noted that average two- and five-year fixed mortgage rates have risen to almost 6%, although cheaper deals remain available.
“Borrowers coming off fixed rates of around 1 per cent will be hit with a significant payment shock when they remortgage,” he added.
‘Remarkable resilience’
Jason Tebb, president of OnTheMarket, said the September figures reflected both caution and continued demand.
“With house prices unchanged in September, there is an element of caution combined with continued underlying demand as focused buyers and sellers returned from holiday keen to proceed with their moves before the end of the year.
“The market continues to demonstrate remarkable resilience, despite higher mortgage costs.”
Tebb said attention would now turn to the Budget and any measures aimed at supporting housing activity.
Budget takes centre stage
Nathan Emerson, CEO of Propertymark, said short-term fluctuations should be viewed against wider economic conditions.
“Against a backdrop of continued pressure across the global economy, it is perhaps unsurprising to see some fluctuation in domestic house prices,” he said.
Emerson added that support for first-time buyers would be particularly welcome given deposit and affordability pressures.
He also called for measures to encourage continued investment in housing and support future supply.
The index was previously known as the Halifax House Price Index. It became the Lloyds House Price Index in July, while retaining the same methodology.
