(Bloomberg) -- UK house prices held up better than forecast in September as the recent surge in mortgage rates showed signs of easing.
Average house prices were unchanged at £257,808 ($314,060) after two months of falls, mortgage lender Nationwide Building Society said in a statement Monday. Economists in a Bloomberg survey had predicted a drop of 0.4%. Prices fell 5.3% from a year earlier, the same pace as in August.
“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,” said Robert Gardner, Nationwide’s chief economist. “If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”
Signs of stabilization came after the average borrowing rate on a five-year fixed-rate deal fell below 6% for the first time since early July last week.
A sustained easing in the property-price slump would give Prime Minister Rishi Sunak a boost in the the run-up to a general election expected next year.
While borrowing rates on home loans have started to cool after jumping earlier in the summer, they are still at painfully high levels for Britain’s squeezed families. Bank of England data suggests that interest rates on new mortgages are more than triple their level in early 2022.
House prices are now down 5.8%, or £15,943, from their peak in August 2022 on Nationwide’s measure. Many economists expect a peak-to-trough decline of around 10%, suggesting the market is now over halfway through its slump
“The downturn in house prices probably has only a few months left to run,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. The market is “close to bottoming out,” he said.
Nationwide said that sales of flats are holding up better than other properties as stretched affordability forces buyers to seek out smaller, cheaper homes. However, flats also saw the biggest year-on-year fall in quarterly data also released by the lender.
The price slump eased in London with values down 3.8% in the third quarter compared to a year ago, an improvement from the 4.3% fall the previous quarter.
The South West was the worst-performing region with prices sliding 6.3% in the third quarter, while Northern Ireland was the strongest.
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