Cost of a house dropped by 5.3% in September

This was roughly similar to the year-on-year figure seen in August – while there was a month-on-month decline of around 0.8% with the average price of a home going from £259,153 to £257,808.  

Commenting on the figures, Nationwide’s chief economist Robert Gardner said: “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, c.30% below the monthly average prevailing in 2019 before the pandemic struck.  

“This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%.  

“However, investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening.  

“This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home. 

“Nevertheless, with Bank Rate not expected to decline significantly in the years ahead, borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic.  

“Instead, it appears more 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.” 

The bank also found signs more buyers are looking towards smaller, less expensive properties, with transaction volumes for flats holding up better than for other property types.  

In addition to the monthly figures, Nationwide has produced a quarterly set of data for the third quarter of 2023 – which showed annual price declines in all regions of the UK. Of these, the south west was the weakest performing, with prices down by 6.3% year-on-year, while Northern Ireland remained the best performing – with a modest 1.8% fall.

Wales, meanwhile, saw a sharp slowing in its annual rate change – going from a 1.4% decline to a 5.4% decline between the second and third quarters of 2023 – while Scotland saw a 4.2% drop in prices. Across northern England, prices were down 3.9% when compared to the third quarter of 2022 while southern England saw a 4.8% year-on-year fall.