TOP NEWS: UK housing market stays subdued but BoE pause offers hope

(Alliance News) - UK housing market activity "remains weak", mortgage lender Nationwide reported on Monday, with lofty borrowing costs still putting off would-be buyers.

House prices declined 5.3% on-year last month, following a fall of the same pace in August, according to the latest Nationwide house price index.

On a monthly basis, prices were flat in September, following a 0.8% decline in August from July.

Nationwide Chief Economist Robert Gardner said: "Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, [around] 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.

"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."

The Bank of England last month decided against enacting another lift to UK interest rates in a split decision after a cooler than expected inflation reading took some pressure off Threadneedle Street.

The BoE maintained bank rate at 5.25%, a more than 15-year high, in what was somewhat of a surprise move. According to FXStreet cited consensus, a 25 basis point hike was expected, though a tamer UK inflation reading earlier this week meant some investors dialled back their rate hike bets.

It ended a streak of 14 successive hikes since December 2021, which have shot up the bank rate from a Covid-19-induced low of 0.10%. It is the BoE's first pause since November 2021.

Nationwide's Gardner added: "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."

By Eric Cunha, Alliance News news editor

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