House price growth halves in September - Nationwide

(Sharecast News) - House price growth slowed sharply in September, industry data showed on Thursday, as economic and geopolitical tensions mounted. According to the latest house price index from Nationwide, UK annual growth halved to 0.8% from 1.6% in August. The market had been looking for a far more modest decline, to 1.3%. Month-on-month, house prices declined 0.2%, compared to an 0.2% uptick in August.

The average house price now stands at £274,251.

Nationwide said the housing market had been battling an "uncertain" economic backdrop.

"Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices, fanning inflation concerns," said Robert Gardner, the building society's chief economist. "This in turn has led to mounting financial market expectations of Bank Rate increases, which has maintained upward pressure on the market interest rates which underpin mortgage pricing."

Earlier this week, data from the Bank of England showed a steep decline in net mortgage approvals in August - a key measure of future borrowing - outstripping market expectations, while the effective interest rate ticked higher.

Inflation reached 3.1% in August. The BoE has so far left the cost of borrowing on hold this year, at 3.75%, but at its last meeting the Monetary Policy Committee warned Bank Rate would be hiked if inflation continued to rise.

However, Gardner insisted there remained "encouraging signs that higher energy prices are not feeding through to underlying price pressures".

"In particular, private sector wage growth has remained modest, which should give policymakers breathing space to assess the extent to which tighter policy is necessary," he said.

He also noted that underlying affordability was improving, with house price growth well below earnings growth "for some time".

"This suggests that activity should regain momentum in the quarters ahead, providing the energy shock fades and confidence returns - especially if market interest rates fall back to pre-conflict levels."