House prices: first glimpse of mini-budget carnage, with more horror to come

House prices fell 1.4% in a month – the biggest monthly fall since June 2020. They’re up 4.4% in the year to October – down from 7.2% in September. Nationwide puts the average house price at £263,788.

Someone with a 20% deposit, borrowing 4 times their income, in London and the South East, would need to be in the top 10% of earners to afford a typical first-time buyer property. In the South West they’d need to be in the top 20%.

More people have been priced out since the onset of the pandemic. In the East Midlands, West Midlands and East Anglia they would have to be in the top 30% of earners – before the pandemic they would have needed to be in the top 40%.

Nationwide has released its house price index for November: Annual house price growth slows sharply in November.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “The carnage wrought by the mini-budget may have tipped the property market over the edge. The delay in sales being completed means this is just a first glimpse of the horrors that may lie ahead, and it’s looking like the next few months could be something of a nightmare. Prices fell 1.4% in November, their biggest monthly drop in two and a half years.

“Kwasi Kwarteng’s ill-fated budget, caused a horrible spike in mortgage rates, which spooked the market, and buyers deserted in droves. Zoopla figures have shown that demand plummeted 44% in the following months.

“We’re not seeing anything like the full impact of this in the figures, because on average it takes around three months to complete a sale, so it’s likely to include only around a week of sales agreed after mortgage chaos was unleashed. Even at that point, sales being settled were highly likely to have been funded by mortgages agreed well before everything kicked off, so all we’re seeing is the effect of a sudden and possibly catastrophic loss of confidence.

“In theory, buyers always knew rates would rise, because they were already on their way up. However, the speed and scale of the hikes made them all-too aware of the risk. Meanwhile, fear spread that prices could be on their way down before long.

“Affordability was being stretched to the limit, with only the top 10% of earners in London able to buy with a 20% deposit and a mortgage worth four times their salary. So buyers started to ask themselves why they’d push themselves, and risk being pressed even harder when it came to remortgage, only to risk seeing the value of their property fall away next year.

“In the intervening weeks, mortgage rates have backed off, and are expected to fall further, but the damage may well have been done. Bank of England figures show that mortgage approvals are down – a sure sign of subdued activity – and assuming we get confirmation that we’re in a recession, it could be the nail in the coffin for market confidence.”