UK House Price Growth Halves Amid Rising Mortgage Rates
Annual house price appreciation slowed significantly in September as higher interest rates impacted the market, with a notable regional divergence.
House prices in the UK saw their annual growth rate cut in half during September, dropping to 0.8% from 1.6% in August, according to data released by Nationwide Building Society. This marks the weakest annual growth recorded since December 2025, with the typical home now valued at £274,251.
On a monthly basis, the average house price decreased by £1,214, or 0.2%, continuing a downward trend that has seen average prices fall by £4,639 since April. Robert Gardner, chief economist at Nationwide, cited an "uncertain economic backdrop." He cited high geopolitical tensions and their pressure on energy prices, which in turn fuels inflation concerns. These factors have led to increased expectations of bank rate hikes, consequently pushing up mortgage interest rates.
Regional variations persist, with prices in northern England showing resilience. The North West and North East both experienced 3.9% annual price increases. In contrast, areas in the south have seen prices stagnate or decline. Homes in London's commuter belt are down 0.4% year-on-year, affecting areas such as Basildon, Buckinghamshire, and Chelmsford. East Anglia has seen a 0.7% decrease, East Midlands 0.5%, and the South West 0.3% lower compared to last year.
Jonathan Hopper, chief executive of Garrington Property Finders, noted that the supply of homes for sale now exceeds the number of serious buyers, which is exerting downward pressure on prices more broadly. He highlighted that higher property values in southern areas mean buyers typically require larger mortgages. The recent rise in interest rates has reduced affordability, giving current buyers a stronger negotiating position.
Mortgage Rates on the Rise
The increase in mortgage rates has contributed to the recent slowdown in the housing market. Several lenders, including Nationwide Building Society, Virgin Money, and TSB, have raised their mortgage rates, leading to the disappearance of deals below 5%. Most borrowers are now facing rates between 5% and 5.5%, a significant increase from the beginning of the year when rates below 4% were common, with some two-year fixes even reaching 3.5%.
Data from the Bank of England indicates a decrease in net mortgage approvals for house purchases in August, falling to 54,900 from 55,900 in July. This figure is below the average of approximately 60,100 observed over the preceding six months, suggesting a cooling of borrowing activity.