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House price growth slows to just 1.1%, according to Nationwide

The average house now costs £258,297, up from £262,068 in December 2022

House price growth slows to just 1.1%, according to Nationwide, as interest rate hikes affect mortgage affordability amid uncertain economy

  • The average house now costs £258,297, up from £262,068 in December
  • Month-on-month prices fell 0.6% and are 3.2% lower than August

Annual growth in UK house prices slowed to 1.1% in January from 2.8% in December as tough economic conditions and rising interest rates continued to weigh on the market.

The average house now costs £258,297, up 12.4% over two years, according to Nationwide’s latest house price index.

However, month on month, prices have fallen 0.6% from £262,068 in December and are now 3.2% below their August peak.

The average house now costs £258,297, up from £262,068 in December 2022

The average house now costs £258,297, up from £262,068 in December 2022

Robert Gardner, Nationwide’s chief economist, said: “However, there are encouraging signs that mortgage rates are normalizing, but it is too early to tell whether activity in the housing market has started to pick up.”

“The decline in December home purchase approvals reported by the Bank of England largely reflects the sharp drop in mortgage applications following the mini-budget.”

A total of 35,600 mortgages were approved in December, the lowest level since May 2020.

The average interest rate paid on new mortgages in December also rose by 0.32%, to 3.67%, marking the biggest monthly jump since December 2021, when the Bank of England began raising its base rate.

The typical two-year fixed-rate mortgage fell from a high of 6.65% in October to 5.45% on January 31, according to Moneyfacts.

Five-year corrections followed a similar trajectory, falling from a high of 6.51% in October to 5.2% today.

And, in more good news for borrowers, lenders have begun to engage in what brokers call a “price war”.

Major lenders including Halifax, Santander and Barclays have all cut their fixed mortgage rates in the past two weeks.

House price growth has started to stagnate, with prices rising just 1.1% in the year to January 2023

House price growth has started to stagnate, with prices rising just 1.1% in the year to January 2023

However, Nationwide’s Gardner warned that the rate hike has hit affordability as potential buyers weigh whether they can afford the cost of servicing a mortgage at current rates.

He said: “If recent mortgage rate cuts continue, this should help improve the affordability position for potential home buyers, albeit modestly, as should solid rates of income growth (wage growth is currently dwindling). 7% in the private sector), especially if combined with weak or negative house price growth.

Gardner also warned of tough economic times ahead.

He adds: “It will be difficult for the market to regain much momentum in the near term, as economic headwinds are expected to remain strong, with real incomes likely to fall further and the labor market expected to largely weaken as the economy is shrinking.”

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed rate contract is coming to an end or because they have agreed to buy a home should explore their options as soon as possible.

This is Money’s best mortgage rate calculator, powered by L&C, that can show you deals that match your mortgage and property value.

What if I need to remortgage?

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to get a rate.

Anyone with a fixed-rate deal ending in the next six to nine months should consider how much it would cost them to remortgage now — and consider entering into a new deal.

Most mortgage transactions allow fees to be added to the loan and they are then only charged at the time of subscription. By doing so, borrowers can secure a rate without paying costly arrangement fees.

What if I buy a house?

Those who have agreed to buy a home should also aim to get quotes as soon as possible, so they know exactly what their monthly payments will be.

Homebuyers should be wary of overstretching and prepare for the possibility of home prices falling from their current high levels, due to higher mortgage rates limiting people’s ability to borrow.

How to Compare Mortgage Costs

The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.

You can use our best mortgage rate calculator to view offers that match your home’s value, mortgage size, term, and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the loan mortgage that’s right for you.

> Check out the best fixed rate mortgages you could apply for

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