UK house prices grew by an annual rate of 0.5 percent in October, the slowest pace in more than two years, according to Nationwide. The average property price was £273,566, flat on the previous month.
Mortgage costs weigh on buyers
Average five-year fixed-rate mortgage costs hit 6 percent in October for the first time in three years, according to Moneyfacts. The five-year rate stood at 5.99 percent on Thursday, while the two-year rate was 5.97 percent.
Robert Gardner, chief economist at Nationwide, said Middle East conflict had FED inflation concerns and pushed up expectations of higher interest rates. Bond market volatility has lifted swap rates, which feed into fixed-rate mortgage pricing.
Rate rise expected next week
The Bank of England has held its base rate at 3.75 percent since last December. Markets expect the monetary policy committee to raise it to 4 percent at its meeting next week, which would be the first increase in three years.
Gardner said property prices were likely to fall further and that new buyer inquiries from surveyors remained weak. Consumer sentiment dipped noticeably in October.
Government scheme seen as limited help
Chancellor John Healey confirmed the Your First Home scheme in this week’s budget, aimed at first-time buyers without family financial help. The government has allocated 4.7 billion pounds to it.
Tom Bill, head of UK residential research at Knight Frank, said rising mortgage costs outweighed any support measure in the budget. He said the absence of major shocks could produce a modest relief bounce in coming months.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the scheme could provide a modest boost but prices were likely to remain subdued next year.
Related: Brazil's October inflation preview shows food prices up 0.88%
Source: Bank of England · Nationwide
