Mortgage costs continue to squeeze demand for home buyers, UK housing price growth has come to a standstill

The Zhitong Finance App learned that the Nationwide Building Society, one of the UK's largest mortgage lenders, said that due to soaring mortgage costs, potential buyers were squeezed, and housing prices in the UK failed to grow in October. The Nationwide Building Society said on Friday that the average house price in the UK remained flat at £273,566 (about US$366,540) in October, after falling 0.3% in September. Economists had predicted a 0.2% drop in housing prices in October.

The war in the Middle East shattered market expectations of interest rate cuts and boosted borrowing costs. Since then, the UK real estate market began to show signs of pressure. Interest rates on major mortgages have recently risen to 6%, compared to 4.8% before the conflict broke out, causing interested buyers to delay finding a property. Nationwide said that housing prices in October were only 0.5% higher than the same period last year, the slowest year-on-year increase since January 2024.

UK housing prices are facing downward pressure

Nationwide's chief economist Robert Gardner said, “In recent months, real estate market transactions and housing price increases have both slowed, partly reflecting the uncertainty of the economic environment.” He added that concerns about inflation caused by energy shocks have caused “financial market expectations of the Bank of England's interest rate hike to continue to heat up, so market interest rates that support mortgage pricing continue to face upward pressure.”

The report further confirms that potential buyers are under pressure. According to the Bank of England, demand for home loans has fallen to its lowest level since December 2023. According to official data released by the UK Office for National Statistics, housing prices fell for the third month in a row in August.

Demand for home purchases is expected to remain sluggish in the short term. Real estate research agencies say concerns about rising borrowing costs are prompting buyers to temporarily withdraw from the market. Bank of England officials are expected to raise interest rates at next week's meeting to deal with inflationary pressure caused by the Middle East conflict.

Meanwhile, rising energy and fuel prices put increasing pressure on households, and consumer confidence declined sharply in October.

UK mortgage rates rise to 6%, putting pressure on homebuyers

Tom Beale, head of British housing research at Knight Frank (Knight Frank), said, “The impact of the Middle East conflict on the UK real estate market is becoming more and more obvious over time.” He pointed out, “The impact of rising mortgage costs exceeds what any support measures announced by the Chancellor of the Exchequer in this week's budget can help. However, the Chancellor of the Exchequer has not introduced major impactful measures, which may bring about a certain degree of market rebound in the next few months.”