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Further Evidence the Housing Market is Slowing Down

By on October 31, 2014
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According to Nationwide, the second biggest mortgage lender in the UK, the rate of house price growth continues to slow.

Nationwide released their latest house price index report which reveals the current trends of the UK housing market. According to their statement, house price inflation slowed to 9.0% in October on an annual basis. The rate slowed from 9.4% in September indicating the market has “lost momentum”.

It is the second month in a row where annual property price growth has fallen. Although the rate of growth decreased in October, the average house price in the UK increased by 0.5% to £189,333. Robert Gardner, Nationwide’s chief economist said “A variety of indicators suggest that the market has lost momentum. The number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year”.

A decreasing rate of growth can give a long term prediction of the market compared to current average house prices. Current prices indicate the housing boom is still in full swing but the latest inflation figures shows the prices are continuing to slow down. As house price growth begins to slow, those looking to sell will become more motivated with the notion that prices are set to fall, at which point those looking to buy will hold back until prices plateau.

The Nationwide report also points out that the majority of borrowers are opting for fixed rate mortgages. The data suggests that in the past few months, around 90% of new mortgages have been on fixed rates compared to just 67% from 2 years ago. “Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Some 95% of new mortgage lending to first time buyers is currently on fixed rates” said Gardner.

The figures released are the third indicator this week that suggests the UK housing market is cooling. The Bank of England revealed that the total number of approved mortgages had fallen to the lowest rate in 14 months. The Land Registry has also released a report which states that house prices had fallen for the first time in nearly a year. Last month Nationwide said that September saw the first fall in house prices in 17 months but the Land Registry index takes into account cash purchases making it more reliable.

Monthly house price readings can dramatically fluctuate however given that various sources have revealed the past two months has seen slowing prices, it is fair to say the housing market is cooling. Next months report will become vital in predicting the near future of the housing market.

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