House price growth slows to annual rate of 2.1%

house price

House price growth continued to ease this month as the economic slowdown takes its toll on activity in the market, according to Nationwide.

The building society reported a 0.1 per cent fall month-on-month in prices in August but said the annual rate of growth slowed to 2.1 per cent from 2.9 per cent in July, Sky reports.

It cited several likely factors for the drop – top of these being the Brexit-linked cooling in the UK economy witnessed this year in the wake of the EU referendum result.

The lender said demand for properties remained subdued given the squeeze on household budgets – a consequence of higher inflation outstripping wage growth.

At the same time, a softening in mortgage approvals could reflect pressure on mortgage providers not to repeat past mistakes by allowing buyers to borrow more than they can handle.

Nationwide’s chief economist, Robert Gardner, said: “In some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market.

“The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4 per cent – the lowest rate for over forty years. In addition, mortgage rates have remained close to all-time lows.

“It may be that mounting pressure on household finances is exerting a drag.”

He added: “While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England.”

Nationwide forecast annual growth of 2 per cent for the market this year with constrained supply supporting prices.

It said the stock of homes on estate agents’ books remained close to 30-year lows while the number of new homes coming onto the market remained subdued.