UK property price growth flatlined last month with a stronger slowdown expected in the coming months as surging inflation and mortgage rates take their toll on affordability levels for homebuyers.

The latest Nationwide HPI was released after a difficult week for those working in the housing sector, with around 40% mortgage products withdrawn by lenders.

The property price data reveals that a typical UK home cost £272,259 in September, broadly unchanged from a month earlier, reducing annual growth in prices to 9.5% – the first time house price growth has slowed to single digits since last October.

Overall, 10 of the UK’s 13 regions recorded slower annual price growth in Q3 2022 as housing market activity slowed. The only regions to show an increase in annual residential property prices last month were the East Midlands, West Midlands and London.

“Headwinds are growing stronger, suggesting the market will slow further in the months ahead,” said Robert Gardner, Nationwide’s chief economist. “High inflation is exerting significant pressure on household budgets, with consumer confidence declining to all-time lows. Housing affordability is becoming more stretched.”

According to Gardner, a 10% deposit on a typical first-time buyer property was now equivalent to almost 60% of annual gross earnings – a record high.

“Buyers can no longer match the inflated pandemic price expectations of many sellers and it is only a matter of time before this adjustment causes house prices to decline,” said Chris Hodgkinson, MD of HBB Solutions.

“Those currently looking to sell are advised to do so quickly because it won’t be long before their home is commanding considerably less, or failing to sell altogether due to an unrealistic asking price expectation,” he added.

Responding to the Nationwide House Price Index, Anthony Codling, CEO, twindig, said: “The dynamics in the housing market have changed. At the start of the pandemic, a temporary stamp duty holiday led to a surge in housing market activity. This time around, a permanent stamp duty cut, along with other tax cuts, appears to risk causing the housing market to stall as hundreds, if not thousands, of mortgage products have been taken off the shelves and several lenders have shut up shop for new buyers altogether.

“The last time we saw such turmoil in the mortgage market was during the Global Financial Crisis when the level of housing activity halved and house prices fell by almost 20%.

“The last week has been a long one raising lots of questions that still need to be answered, and with so much uncertainty ahead it is unlikely that house prices will continue to rise, although the last time I said that was at the start of the pandemic, and average house prices have increased by £56,000 since then.

Nathan Emerson, Chief Executive of Propertymark, commented: “Sellers coming to market are still hoping to achieve the boost in prices we saw coming out of bidding wars last year. However, buyers are in a more sensible frame of mind and are taking their time over moving and budget decisions and we will see this effect prices being achieved.

“Our own data from our estate agent members across the UK shows the number of new homes and buyers coming to the market is up year-on-year which will underpin stability.

“With interest rate rises, we could start to see some re-negotiations if mortgage offers expire during the conveyancing process which is currently taking over 17 weeks on average.

“A trend of re-negotiation would start to soften house prices as those final sale prices are used by agents to create comparable evidence for the valuing of new properties entering the market.”

Guy Harrington, CEO of residential lender Glenhawk, believes that property price growth will inevitably slow – with prices potentially falling altogether.

He commented: “The decade long house price growth party is over. If we do indeed see rates anywhere near the 6% that the markets are pricing in, the only outcome is a housing market crash.

“The BoE’s misguided obsession with crushing inflation has left an overpriced housing market at the mercy of the banks. Only a rapid unwinding of rates when the true scale of consumer headwinds becomes apparent this winter will prevent a prolonged period of turmoil for homeowners.”

Matthew Thompson, head of Sales at Chestertons, added: “We have been witnessing a growing number of house hunters who rush to secure a property in order to benefit from a fixed rate mortgage at a more beneficial rate. This has contributed to London’s property market remaining busy and competitive throughout July, August and September.

“As interest rates are increasing and lenders are adjusting their affordability calculations, buyers who have not yet found a property may be facing a change in what they can afford. As a result, many house hunters will be required to review their initial budget, whereby rising utility costs play yet another important factor to take into account.

“To still find a new home before further interest rate hikes, many of London’s house hunters will see no other option but to compromise on property location and size. Inevitably, this could lead to some buyers deciding to compromise on the type of property they initially set out to buy.”

Meanwhile, the latest data from the Bank of England, released last Friday, shows that mortgage approvals increased to 74,340 in August, up from 63,740 on the previous month and exceeding the 73,075 seen in the corresponding month of last year.

It ‘feels almost inevitable’ that property prices will fall