UK house prices dropped in August as households are still struggling to secure a deposit and amid high monthly mortgage payments, according to lender Nationwide.
On a monthly basis, house prices slipped 0.1%, after seasonal adjustments. Prices rose by 2.1% compared to the same month last year, down from 2.4% in July.
The average UK house price now stands at £271,079, slightly down from £272,664 in July.
The slowdown in growth comes amid stretched affordability, which continues to dampen buyer demand. House prices remain elevated relative to household incomes, with cost of- iving pressures still weighing on potential buyers.
Robert Gardner, Nationwide’s chief economist, said: “The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms.
“House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost-of-living pressures in recent years.”
Higher borrowing costs are also a key factor. Despite interest rate expectations easing, typical mortgage costs remain above pre-pandemic levels.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many,” Gardner said.
“Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.”
Gardner added that affordability could improve gradually, supported by steady wage growth and potential future rate cuts. “Borrowing costs are likely to moderate a little further if bank rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.”
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