House prices see biggest drop for two years as growth slows sharply

1 December 2022, 17:13 | Updated: 1 December 2022, 17:24

1. Picture: Getty / Alamy

By Chris Samuel

UK house prices saw their biggest monthly fall for more two years in November, Nationwide has said.

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Prices fell 1.4% from October, the biggest month-on-month drop since June 2020.

Annual house price growth saw a "sharp slowdown", the building society said, dropping to 4.4% from 7.2% in October.

It added that the housing market looked set to "remain subdued" in the coming months.

The average property price fell to £263,788 last month from £268,282 in October, it said.

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Mortgage rates leapt following the 'mini-budget' in September, with Bank of England base rate rises also increasing borrowing costs, while households are facing costs squeezes more generally.

Nationwide's chief economist, Robert Gardner, said: "A lot of this reflects the fallout of the mini-budget and the big rise that we saw in mortgage rates, because that really did change the affordability calculations for prospective buyers and really made things a lot less affordable."

He added: "If you look at the typical mortgage payment as a share of someone's take-home pay, for the typical first-time buyer that was running at close to long-run averages of 30%.

"But as a result of the mini-budget it's moved up to around 45% of take-home pay, which is clearly a massive difference."

Mr Gardner said the housing market was likely to be under pressure for some time, with inflation set to remain high and a further interest rate rise from the Bank of England likely.

But he added that while the outlook was uncertain, it was still possible for the market to have a "relatively soft landing", given that rates of employment remain high and there is a lack of properties coming on the market.

He also noted that in recent weeks, borrowing costs had started to drop.

Last week, figures from Moneyfacts showed that for the first time in two months, the average five-year fixed mortgage rate had dropped below 6%.

Earlier this week, the Bank of England said the number of mortgage approvals in October dropped to its lowest level since June 2020.

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