"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."
Annual house price change remained at -5.3% in September, the same as the previous month, according to the latest Nationwide house price index.
Prices were also flat over the month, after taking account of seasonal effects, following the 0.8% decline seen in August.
All regions recorded annual house price falls in Q3. The South West was the weakest performing region, with prices down 6.3% year-on-year, while Northern Ireland remained the best performing region, with a modest 1.8% fall.
Wales saw a sharp slowing in the annual rate of change to -5.4%, from -1.4% last quarter. While Scotland also saw a slowing in annual house price growth to -4.2%, from -1.5% in Q2.
Across northern England, prices were down 3.9% compared with Q3 2022. Meanwhile southern England saw a 4.8% year-on-year fall. London was the best performing southern region, although still saw a 3.8% annual decline.
Robert Gardner, Nationwide's chief economist, 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."
