UK economy crisis worsens as house price dip piles more pressure on Reeves | Personal Finance | Finance

Annual house prices have unexpectedly dipped month-on-month, with experts warning that “confidence is fragile” in an uncertain market.

The growth rate eased to 2.1% in August from 2.4% in July, while prices slipped 0.1% month-on-month, according to Nationwide’s House Price Index.

Financial experts attributed the slowdown to a slight increase in mortgage rates – despite a drop in the base rate, leading to confusion among potential buyers.

However, they are predicting a surge in demand come September.

Chris Barry, Director at London-based Thomas Legal, commented: “The property market is awash with stock but thin on demand. Given that demand drives prices, it’s no surprise that average values fell slightly in August.

“Even the interest rate cut earlier last month had very little impact on enticing new buyers. Transaction volumes in August started very quietly compared with prior years.

“At the end of August, things did pick up slightly but this was mostly caused by heightening speculation of a seriously tough Budget and people wanting to alter their property position in advance of impending October announcements.”

Andrew Montlake, CEO at London-based Coreco, forecasted a surge in demand in September.

He added: “Demand was reasonable in August following the base rate cut, although swap rates have edged up since with a few lenders also repricing upwards slightly.

“That may explain why prices dipped slightly last month. Despite the base rate cut, mortgage rates increased marginally, causing a degree of borrower confusion. There could be a surge in demand as we enter September and lenders start actively competing for business before year end.

“The property market is holding on in there and August is often a quiet month so a small monthly fall in prices is not unexpected.”

Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, suggested that many buyers might be keeping an eye on the Autumn Budget.

She went on to say: “August was far from subdued in our experience. In fact, it was exceptionally busy and buyers were very much in the driving seat.

“September is generally an active month in terms of new enquiries, as the school holidays come to an end, but many prospective borrowers will doubtless have one eye on the Autumn Budget.

“We’ll soon know whether people wait to see what that delivers before making their move or try and get their transaction moving promptly to try and get ahead of any of the rumoured tax changes.”

Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, lamented the shaky confidence in the market.

She added: “Under the bonnet, the market is messy and drifting along, which ties in with the slight drop in house prices.

“Down valuations are rife and only cash buyers or borrowers with rock-solid affordability are in the driving seat. The Bank of England’s cut gave a flicker of hope, but it was snuffed out as swap rates edged higher due to the close vote and inflation once again edging up.

“In truth, confidence is fragile and transactions are struggling to get going. Sentiment can only stretch so far before it snaps and the looming Budget could be the final straw.”

Rohit Kohli, Director at Romsey-based The Mortgage Stop, said “the market looks set for a bumpy few months”.

He added: “Demand has held steady through August and residential purchase valuations have been broadly consistent. The real friction has been in the buy-to-let sector, where down valuations of 10%–15% are becoming common.

“It’s not lining up with reality on the ground, where tenant demand remains strong and rents are still climbing. On the mortgage side, the Bank of England’s rate cut raised borrower expectations of cheaper deals, but lenders didn’t follow through. With swap rates pushing up, many borrowers feel disappointed.

“They were hoping for relief and instead saw little change in the products available. Sadly, with the government adding uncertainty around stamp duty, property taxes, council tax and even national insurance on rents, the market looks set for a bumpy few months. For a government that said it would bring stability, this feels pretty daft.”