House prices continue to rise at a double-digit pace but annual growth slowed in September, fresh data from Nationwide has revealed.
In the year to September, the average cost of a home across the country increased by 10 per cent to £248,742, against an 11 per cent rise in the year to August.
Property inflation has added £22,613 to the cost of the average home in just a year, although prices appear to be slowing with a monthly rise of just 0.1 per cent in September.
Affordability remains a major problem for many buyers, and Nationwide said a 20 per cent deposit on a typical first-time buyer home is now around 113 per cent of their typical before tax income.
![House prices in London and the surrounding area are rising at the slowest pace in the UK](https://i.dailymail.co.uk/1s/2021/09/30/11/48587705-10044515-image-m-3_1632996425018.jpg)
House prices in London and the surrounding area are rising at the slowest pace in the UK
![House price annual shifts across the country, mapped by Nationwide, with the lighter blue colours representing where prices are rising fastest](https://i.dailymail.co.uk/1s/2021/09/30/11/48587847-10044515-image-a-4_1632996743398.jpg)
House price annual shifts across the country, mapped by Nationwide, with the lighter blue colours representing where prices are rising fastest
During the pandemic, the housing market has been turbocharged by a stamp duty holiday, cheap mortgage deals, and a desire for fresh surroundings combining with noted buyer demand for more space.
The stamp duty break up to £500,000 was tapered down to £250,000 in July and from tomorrow, 1 October, property purchase tax rates revert to normal – all homes costing more than £125,000 incurring bills. There is a higher £300,000 threshold for first-time buyers. Similar tax breaks in Scotland and Wales have already ended.
Some agents are suggesting the previously rampant seller’s market is shifting mood.
‘The air was sucked out of the room in September for those sellers who’d come to market thinking they call the shots’, Lucy Pendleton, a property expert at independent estate agents, James Pendleton, said.
![The pace of annual house price growth has slowed but remains in double digits](https://i.dailymail.co.uk/1s/2021/09/30/11/48587859-10044515-image-a-5_1632997257628.jpg)
The pace of annual house price growth has slowed but remains in double digits
![The pandemic property boom has seen the cost of the average home shoot up](https://i.dailymail.co.uk/1s/2021/09/30/11/48587861-10044515-image-a-6_1632997277732.jpg)
The pandemic property boom has seen the cost of the average home shoot up
Wales and Northern Ireland saw the most rapid house price inflation in the UK over summer, while London was the weakest.
In Wales, property prices have risen over 15 per cent in the past year. Meanwhile, London saw annual growth slowing to 4.2 per cent, between June and September, down from 7.3 per cent in spring.
England saw house price inflation slip back to 8.5 per cent, from 9.9 per cent between March and June.
Property price growth in the North continues to exceed that in southern England, Nationwide said.
Robert Gardner, Nationwide’s chief economist, said: ‘Annual house price growth remained in double digits for the fifth month in a row in September, though there was a modest slowdown to 10 per cent, from 11 per cent in August.
‘House prices rose by 0.1 per cent month-on-month, after taking account of seasonal effects. As a result, house prices remain (around) 13 per cent higher than before the pandemic began in early 2020.’
![](https://i.dailymail.co.uk/1s/2021/09/30/11/48580469-10044515-image-a-7_1632997315568.jpg)
Demand for housing has been strong since shortly after the lifting of the first coronavirus lockdown measures in the spring of 2020.
The surprise pandemic property boom has been aided by cheap mortgage rates and boosted by demand for bigger properties and a shift in buying attitudes as more people work from home.
This has led to red hot markets in commuter towns on the edge of the countryside and popular rural hotspots, and further fuelled by the stamp duty break offered by Chancellor Rishi Sunak.
House prices in September were about 13 per cent higher than before the pandemic began in early 2020, Nationwide said.
![Northern powerhouse: With a brief exception, house price inflaton in the North has been running consistently higher than in the South for a number of years](https://i.dailymail.co.uk/1s/2021/09/30/11/48587857-10044515-image-a-9_1632997817848.jpg)
Northern powerhouse: With a brief exception, house price inflaton in the North has been running consistently higher than in the South for a number of years
First-time buyers and movers suffer from high prices
Property prices continue to rise more quickly than earnings, meaning affordability is becoming more stretched.
Cheap mortgage rates enable borrowers to stretch further to pay higher prices, but the chief problem for many is raising a deposit for a first home or saving to add equity for a move.
Mr Gardner said: ‘Raising a deposit remains the main barrier for most prospective first-time buyers. A 20 per cent deposit on a typical first-time buyer home is now around 113 per cent of gross income – a record high.
‘Due to the historically low level of interest rates, the cost of servicing the typical mortgage is still well below the levels recorded in the run-up to the financial crisis. However, even on this measure, affordability is becoming more challenging.
‘For example, if we look at typical mortgage payments relative to take-home pay across the country, it is notable that in the majority of UK regions (10 out of 13) this ratio is now above its long-run average. By contrast, pre-pandemic, this was only the case in one region (London).
‘Recent price patterns suggest an element of rebalancing is occurring where most of the regions that have seen the strongest price growth are those in which affordability is still close to or below the long-run average.’
![Cheap mortgages are keeping the market afloat but first-time buyers in many parts o the country are paying more in monthly payments than the long-term average in relation to wages](https://i.dailymail.co.uk/1s/2021/09/30/11/48587855-10044515-image-a-8_1632997663870.jpg)
Cheap mortgages are keeping the market afloat but first-time buyers in many parts o the country are paying more in monthly payments than the long-term average in relation to wages
What next for house prices?
With the end of furlough today and a rise in interest rates on the cards tipped for closer in the future than previously though, it remains unclear how the property market will pan out over the next few months and into next year.
Mr Gardener said: ‘As we look towards the end of the year, the outlook remains uncertain.
‘Activity is likely to soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
‘Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely.
‘But this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic – such as wanting more space or to relocate – to continue to support activity for some time yet.’
![Uncertainty: Nationwide's Mr Gardener said, 'As we look towards the end of the year, the outlook remains uncertain'](https://i.dailymail.co.uk/1s/2021/09/30/08/48581873-10044515-image-a-25_1632986804557.jpg)
Uncertainty: Nationwide’s Mr Gardener said, ‘As we look towards the end of the year, the outlook remains uncertain’
Martin Beck, senior economic advisor to the EY Item Club, said: ‘With the stamp duty threshold set to revert to its normal level of £125,000 from 1 October, the EY ITEM Club expects demand for properties and price growth to soften as a result.
‘But by how much is still unclear. The return of stamp duty to its original level will provide a better idea of the importance of other post-COVID-19 drivers of housing demand and house prices, including the “race for space”, increased use of the home as a workplace, high levels of household savings and lower mortgage rates.
‘Some of these factors may start to fade. For example, the recent hawkish tone from the Bank of England around interest rates has already been reflected in a rise in long-term market interest rates, a development which could, over time, feed into higher mortgage costs.
‘But other supports may prove long-lasting and should continue to buttress house prices for some time to come.
‘So while the strong and sustained house price growth seen over most of the past year or so is unlikely to persist, any serious correction in values looks unlikely.’
On Wednesday, figures from the Bank of England revealed that mortgage approvals fell to the lowest level for over a year in August.
Amid a summer lull and the end of the main phase of the stamp duty holiday, there were 74,453 home-loan approvals in August, down from 75,100 in July, marking the lowest figure since July 2020.
Despite the dip, approvals remained above pre-February 2020 levels, the Bank’s Money and Credit report said.