Nationwide has reported a slight increase in UK house prices, rising 0.2 percent between September and October.
The average property price in the UK is now £211,085, beating economists’ predictions. Annual growth increased from 2.3 percent to 2.5 percent.
Nationwide’s chief economist, Robert Gardner, said: “Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.”
Despite the small rise, the rate is still far lower than the 4.6 percent seen in October 2016. This year’s lower rates appear to be due to the falling wages and pressure on household incomes, said Nationwide.
The Bank’s Monetary Policy Committee is expected to raise rates to 0.5 percent – the first rise in ten years. The hike could hit the property market, where even a 0.25 percent increase could deter first-time buyers.
According to Samuel Tombs from Pantheon Macroeconomics, the housing market is “resilient for now, but headwinds are building”.
Gardner however, has said that a rate hike would affect a smaller proportion of borrowers than it has done in the past. A 0.25 percent hike would increase average monthly payments by £15 to £665.
“That’s not to say that the rise will be welcome news for many borrowers,” he said.
“Household budgets are under pressure from the fact that wages have not been rising as fast as the cost of living. Indeed, in real terms – after adjusting for inflation – wage rates are still at levels prevailing in 2005.”
Howard Archer, from forecasting group EY Item Club, said: “It is also very possible that a likely Bank of England interest rate hike on Thursday will weigh down on housing market activity.
“While any increase in interest rates would be small and mortgage rates would still be at historically very low levels, the fact that it would be the first rise in interest rates since 2007 could have a significant effect on housing market psychology.”