Economists were unanimous in their conclusions following the latest house price index figures from Nationwide predicting falls in house prices in the coming months as rising mortgage rates take their toll on consumer finances.
The building society said its seasonally adjusted measure of house prices held steady on a month-to-month basis in September while year-over-year growth dropped to 9.5%, from 10.0% in August and below the consensus of 9.9%.
Pantheon Macroeconomics senior UK economist Gabriella Dickens said it “was the start of a prolonged fall in house prices” due to the jump in mortgage rates and she expects “ house prices to fall by around 5% over the next 12 months”.
Capital Economics agreed but predicted prices would fall by even more.
“We suspect that, despite the reduction in stamp duty announced last week, this marks the beginning of the most significant correction in house prices since 2007.”
It said the data was consistent with its forecast that prices will be falling by the end of the year.
“The sharp rise in interest rates now expected means that prices are more likely to fall by 10-15% than the 7% we previously anticipated.”
Myron Jobson, senior personal finance analyst at interactive investor, said: “House prices might finally be coming back down to earth following a meteoric rise in recent history.”
“The recent violent gyrations in the money market, which wreaked havoc on the business models lenders use to price mortgages, could accelerate a more prominent property market slowdown,” Jobson suggested.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, pointed to the pulling of 40% of mortgages this week suggesting that “when the dust settles, and lenders come back to the market, we can expect eye-watering rises in interest rates”.
“It's difficult to see this as anything other than a sign of things to come, as these pressures raise the risks not only that price rises stagnate, but that they begin to fall. There is the chance that we could see a significant correction in the coming months” she said.
The EY ITEM Club concurred, saying the figures are “likely to be the precursor to a more significant weakening in house prices and housing market activity”.