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| London house prices fall for first time in eight years as rest of UK rises | London house prices fall for first time in eight years as rest of UK rises |
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| London house prices fell for the first time year-on-year since the height of the financial crisis, underperforming the rest of the UK, Nationwide has said. | London house prices fell for the first time year-on-year since the height of the financial crisis, underperforming the rest of the UK, Nationwide has said. |
| The average price of a home in the capital is £471,761, down by 0.6% between July and September compared with the same period last year. It was the worst performance since the third quarter of 2009, when the UK economy was dealing with the aftershocks of the near-collapse of the global banking system. | The average price of a home in the capital is £471,761, down by 0.6% between July and September compared with the same period last year. It was the worst performance since the third quarter of 2009, when the UK economy was dealing with the aftershocks of the near-collapse of the global banking system. |
| London was the only region in the UK where prices fell over the third quarter, making the capital the weakest-performing region for the first time since 2005. On a national level, house prices rose 2.2% to £210,982. East Midlands was the strongest performer, with prices up 5.1% at £177,825. | London was the only region in the UK where prices fell over the third quarter, making the capital the weakest-performing region for the first time since 2005. On a national level, house prices rose 2.2% to £210,982. East Midlands was the strongest performer, with prices up 5.1% at £177,825. |
| Robert Gardner, Nationwide’s chief economist, said the gap between house price growth in different regions was closing. “House price growth rates across the UK have converged in recent quarters,” he said. | Robert Gardner, Nationwide’s chief economist, said the gap between house price growth in different regions was closing. “House price growth rates across the UK have converged in recent quarters,” he said. |
| “Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country. London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years.” | “Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country. London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years.” |
| He said that in the UK overall, house prices were being propped up by low mortgage rates, high employment, and a shortage of properties on the market, but added that pressure on household incomes was starting to weigh on confidence. | |
| In recent weeks, Bank of England policymakers have signalled that they were nearing the point of raising interest rates for the first the time in more than a decade. Rates are at an all-time low of 0.25%, and economists believe the monetary policy committee could vote for an increase to 0.5% as early as November. | In recent weeks, Bank of England policymakers have signalled that they were nearing the point of raising interest rates for the first the time in more than a decade. Rates are at an all-time low of 0.25%, and economists believe the monetary policy committee could vote for an increase to 0.5% as early as November. |
| Gardner said a small rise in rates would not put excessive pressure on homeowners, partly because a smaller proportion of people were on variable rate mortgages that would be most affected by a rise in interest rates. | Gardner said a small rise in rates would not put excessive pressure on homeowners, partly because a smaller proportion of people were on variable rate mortgages that would be most affected by a rise in interest rates. |
| “Providing the economy does not weaken further, the impact of a small rise in interest rates on UK households is likely to be modest. This is partly because the proportion of borrowers directly impacted will be smaller than in the past,” he said. | “Providing the economy does not weaken further, the impact of a small rise in interest rates on UK households is likely to be modest. This is partly because the proportion of borrowers directly impacted will be smaller than in the past,” he said. |
| “In recent years, the vast majority of new mortgages have been extended on fixed interest rates. The share of outstanding mortgages on variable interest rates has fallen to its lowest level on record, at about 40%, down from a peak of 70% in 2001.” | “In recent years, the vast majority of new mortgages have been extended on fixed interest rates. The share of outstanding mortgages on variable interest rates has fallen to its lowest level on record, at about 40%, down from a peak of 70% in 2001.” |
| In September, UK house prices edged up 0.2%, after a 0.1% dip in August. On an annual basis, prices were up 2% compared with September last year. | In September, UK house prices edged up 0.2%, after a 0.1% dip in August. On an annual basis, prices were up 2% compared with September last year. |
| EY Item Club said UK house price growth was likely to slow to 2.5% this year, from 4.5% in 2016 on Nationwide’s measure. | EY Item Club said UK house price growth was likely to slow to 2.5% this year, from 4.5% in 2016 on Nationwide’s measure. |
| “The fundamentals for house buyers are likely to remain weak over the coming months with consumers’ purchasing power continuing to be squeezed by inflation running higher than earnings growth,” Howard Archer, chief economist at the forecasting group, said. | “The fundamentals for house buyers are likely to remain weak over the coming months with consumers’ purchasing power continuing to be squeezed by inflation running higher than earnings growth,” Howard Archer, chief economist at the forecasting group, said. |
| “Additionally, housing market activity is likely to be hampered by fragile consumer confidence and limited willingness to engage in major transactions.” | “Additionally, housing market activity is likely to be hampered by fragile consumer confidence and limited willingness to engage in major transactions.” |