Annual house price growth softened to 2.1% in August, from 2.4% in July, according to the latest Nationwide house price index.
House prices were down 0.1% month-on-month in the traditionally quieter summer holiday period.
Robert Gardner, Nationwide's chief economist, said: “The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms. House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many. Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.
“However, affordability should continue to improve gradually if income growth continues to outpace house price growth as we expect. Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid."
Jonathan Hopper, CEO of Garrington Property Finders, commented: “Two factors are combining to hold prices down: a flood of supply which has made this a buyer’s market and a ‘back-to-school’ reality check among sellers. Lesson one is a crash course in economics - and the power of supply and demand.
“Deals are being done, but in many parts of the country there are many more sellers than serious buyers, and this is allowing buyers to take their time and negotiate hard on price.
“In response sellers are being forced to price their homes keenly just to get potential buyers through the door. And when it comes to agreeing a price, buyers often hold the strongest cards - even if buyers are behaving differently at different price points.
“While interest rate-sensitive purchasers such as first-time buyers remain very active, discretionary buyers higher up the property ladder are starting to adopt a ‘wait and see’ approach in response to reports of potential tax reforms in the Autumn Budget.
“The August cut in the base rate has yet to introduce any extra zip to the market, and we’re likely to see property prices drag over the next few months.
“In the absence of confidence and clarity, buyers’ offers will reflect the unknown risks in what they are willing to pay. Deals will be done, but only pragmatic sellers are likely to be successful in what is set to remain a very price sensitive autumn market.”
Jonathan Handford, managing director at Fine & Country, said: “A marginal 0.1% dip in house prices suggests the market is catching its breath rather than changing direction.
“While house price growth appears flat at a national level, it's worth noting that there are significant regional disparities, with northern England and Scotland continuing to outpace southern areas.
“This relative steadiness owes much to improving affordability, as housing costs begin to align more closely with incomes. However, price growth remains tempered by rising levels of supply.
“The more-than-healthy stock levels reported by estate agents across much of the country are increasing competition among sellers, giving buyers a stronger hand when negotiating on price.
“Uncertainty around potential property tax changes in the autumn budget may also affect pricing and influence sellers' willingness to be flexible.
“As we move into autumn, clarity on fiscal policy and mortgage conditions will be key to sustaining market momentum. While the property industry is highly adaptable, sweeping changes to taxation or policy risk unsettling activity in the short term.”
Verona Frankish, CEO of Yopa, added: “The market may have paused over the summer, but the annual picture remains one of growth and resilience.
"With the holiday season behind us, attention now turns to the final run up to Christmas, which is traditionally one of the busiest periods of the year and one of the hard deadlines many buyers and sellers set for their completion data.
"The added motivation of moving before the festive season, combined with improving mortgage affordability, should help drive a strong finish to the year for the housing market.”
