Extreme pressure from new home buyers is driving up house prices

The uptick last month is thought to be due to fewer properties coming on to the market.

However, values were down 3.3% compared with October last year, with an average price of £259,423, the Nationwide said.

Robert Gardner, the building society’s chief economist, said: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained. There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at low levels. Activity and house prices are likely to remain subdued in the coming quarters.

“Despite signs that cost-of-living pressures are easing, with the rate of inflation below the rate of average earnings growth, consumer confidence remains weak and surveyors continue to report subdued levels of new-buyer enquiries.”

He said that with the Bank of England base rate not expected to fall significantly in the years ahead, “borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic”.

He added: “Instead, it appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim.”

Jeremy Leaf, a North London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said: “High mortgage rates and inflation may be compromising buyer demand but strong employment and shortage of properties for sale in areas of highest demand is keeping prices strong.”

Anil Mistry, at Leicester-based mortgage broker RNR Mortgage Solutions, said: “We experienced an unexpectedly high volume of enquiries in October, with most coming from first-time buyers. There’s life in the market yet.” Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Sentiment in the UK housing market is weak but unlike the early months of Covid or the period following the mini-Budget, there is no single cause.”

He added: “The seasonal bounce in activity didn’t happen this autumn, although price falls have been kept in check by weak supply.

“We expect UK prices to fall by 7% this year and 4% next year as inflation comes under control and mortgage rates stabilise.”

Mark Harris, head of mortgage broker SPF Private Clients, said: “While interest rates appear to have peaked, those hoping rates will move swiftly downwards again to the rock-bottom levels of the recent past are likely to be disappointed.”

He said those relying on mortgages “are more price sensitive on the back of ongoing affordability concerns”.

Jamie Lennox, director at Norwich-based
broker Dimora Mortgages, said: “October was a strong month in terms of mortgages submitted following a quiet August and first half of September. But the market is still very quiet in historical terms and there’s certainly no rebound yet.

“The base rate is not likely to decline significantly for some time due to inflation.

“However, as mortgage rates fall, we are now seeing more borrowers looking to jump to secure a deal. First-time buyers are particularly active.”

Matt Thompson, at estate agent Chestertons, said: “The vast majority of buyers have accepted that interest rates are here to stay.”

David Hollingworth, at L&C Mortgages, said: “The lack of forced selling is encouraging but prices are likely to feel more downward pressure in the near term.

“The hope will be more activity will gradually return to the market next year, as the more stable mortgage market and the prospect of lower inflation helps to further the current falls in mortgage rates.”

Nathan Emerson, boss of Propertymark, said the property professionals’ body found a slight fall “in the number of available properties for sale at each member branch in September 2023.

“This, fused with issues regarding the cost-of-living crisis, continues to affect the market overall.”

Simon Gerrard, managing director of Martyn Gerrard Estate Agents said: “While prices are still below where they were a year ago, the Bank of England’s recent decision to freeze the interest rate has clearly restored a good amount of buyer confidence.”