The rate of house price growth slowed in October, new figures have suggested.
Growth was just 0.1% in October, according to Nationwide Building Society.
It means the average price of a home in Britain stood at £265,738 last month, down from £266,094 the previous month.
Nationwide described the change in house price growth as a “modest slowdown”, saying the housing market had been relatively resilient given the backdrop of issues such as higher mortgage rates and affordability challenges.
A ‘resilient’ housing market
Robert Gardner, Nationwide’s chief economist, said: “Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the significantly higher interest rate environment.
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“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year.
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
Stamp duty changes for first-time buyers
It comes as the Chancellor announced earlier this week in the Autumn Budget that the current temporary stamp duty discount for first-time buyers will revert at the end of March next year.
The first-time buyer relief nil-rate tax threshold of up to £425,000 will drop back down to £300,000.
At the same time, for other buyers, the nil-rate tax threshold up to £250,000 will drop to £125,000.
Nationwide said the main impact of the stamp duty changes is likely to be on the timing of property transactions, as buyers aim to ensure their house purchases complete before the tax change takes effect.
It suggested that this will lead to a jump in transactions in the first three months of 2025 – especially March – and a corresponding period of weakness in the following 3-6 months, as occurred in the wake of previous stamp duty changes.
Gardner added: “However, the swings in activity are likely to be somewhat less pronounced, in this instance, given that the stamp duty reduction has been in place for some time and its planned expiry was well-known.
“Affordability is also still relatively stretched at present as a result of the higher interest rate environment, which is acting to dampen housing market activity more generally.
“Nevertheless, determining the underlying strength of the market will become more challenging until this period of volatility passes.”
Nationwide said its data for the year to June 2024 suggests that the stamp duty change will affect around one in five first-time buyers – although it claimed the impact will vary significantly across the country, largely as a result of the difference in house prices across the UK.
It said the largest effects are likely to be in the South East of England, where 40% of first-time buyers paid between £300,000 and £425,000 for their homes and where the change will increase the cost of moving for the affected first-time buyers by £2,900 on average.
The areas least affected are Yorkshire and the Humber, the North of England and Northern Ireland, where less than 10% of first-time buyers paid between £325,000 and £425,000 for their homes.
The additional tax paid by affected first-time buyers in these regions will, on average, be lower than in London and the South East.
The Chancellor also announced an increase in the higher rate of stamp duty for additional dwellings by two percentage points to 5%.
Nationwide said that based on data for the year to June 2024, this would affect around 194,000 transactions, which is around one in five residential transactions in England and Northern Ireland.
It estimates that this would add approximately £4,000 to stamp duty costs for a typical buy-to-let (BTL) purchase.
Gardner said this may dampen demand in this part of the housing market.
Lenders are repricing
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Competition among lenders to offer cheaper mortgage rates has boosted housing market activity.
“Many buyers were waiting for rates to come down before taking action, and with hopes that the Bank of England will move again and cut rates next week, this will further encourage those who may be wavering.”
He continued: “Swap rates rose on the back of the Budget, but this could be a knee-jerk reaction rather than a sustained period of higher rates. Only time will tell – if swaps remain at elevated levels for a while, lenders may have to increase their mortgage rates.
“Lenders have been repricing this week – some increasing rates, others reducing pricing in order to attract new business. Borrowers looking for a mortgage should speak to a whole-of-market broker to find the best deal available to them.”
Jeremy Leaf, North London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chair, said: “The number of sales agreed has increased steadily since base rate was reduced in the summer, as have mortgage approvals.
“However, the increase in stock, particularly from landlords who have had their fill of tax and regulatory issues, will worsen.
“We expect the Budget will increase demand for smaller properties as first-time buyers seek to profit from investors unwilling to pay higher taxes before stamp duty rates rise early next year.”
