House prices dip unexpectedly as interest rates continue to dampen demand
House prices dipped unexpectedly for the first time since April this month, but a closely watched survey today suggests that the outlook for the property market is likely to strengthen as interest rates are reined in.
In its closely watched house price index today, mortgage lender Nationwide said British house prices slipped by 0.2 per cent in August despite economists expecting the figures to rise.
Analysts polled by Reuters had forecast prices would rise by 0.2 per cent on the previous month.
In annual terms, prices were 2.4 per cent higher than in August last year, the fastest increase since December 2022—shortly after the “mini-budget” crisis that pushed up borrowing costs—but a smaller gain than the median forecast of 2.9 per cent in the poll.
Robert Gardner, Nationwide’s chief economist, said the housing market remained subdued but was coping with the increase in interest rates.
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease,” Gardner said.
Demand is expected to pick up later this year after the Bank of England began cutting interest rates this month. At its monetary policy meeting in early August, rate setters cut the rate to five per cent from a 16-year high of 5.25 per cent.
Investors are assigning a roughly one-in-four chance of the BoE lowering Bank Rate by another quarter point in September but they are fully pricing a cut at its November meeting.
There have been signs of new momentum in the housing market in recent months.
A survey published by Lloyds Bank earlier on Friday showed that confidence in the construction sector—which includes builders of infrastructure and commercial property as well as residential developers—jumped in August by 14 points to 58 per cent.
The Royal Institution of Chartered Surveyors said earlier this month its measure of expected sales over the next three months was the strongest since January 2020, immediately before the coronavirus pandemic struck Britain.
Additional reporting by Reuters