Mortgage affordability 'to remain challenging in the near term'
The start of 2023 has seen a further slowing in annual house price growth to 1.1pc, from 2.8pc in December, and there are few indications that things will change in the market soon, according to Nationwide.
The building society's chief economist Robert Gardner said:
There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.
The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget.
It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.
As we highlighted in our recent affordability report, the biggest change in terms of housing affordability for potential buyers over the last year has been the rise in the cost of servicing the typical mortgage as a result of the increase in mortgage rates.
Should recent reductions in mortgage rates continue, this should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth (wage growth is currently running at around 7pc in the private sector), especially if combined with weak or negative house price growth.
Nevertheless, the overall affordability situation looks set to remain challenging in the near term.
Good morning
House prices dipped for a fifth straight month as the impact of rising mortgage rates takes hold.
Prices declined 0.6pc in January compared to the previous month, with annual growth slowing to just 1.1pc.
It comes as mortgage rate approvals declined in December to their lowest level since the start of the pandemic.
The average home in Britain is now worth £258,297, according to Nationwide.
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What happened overnight
Asian stocks advanced after US shares ended January on a high note as signs of cooling inflation encouraged risk appetite ahead of the Federal Reserve's meeting this evening.
A benchmark of the region's shares advanced about 0.4pc, with key indexes rising in Hong Kong and Australia, while shares fluctuated in mainland China and Japan.
Tokyo stocks trimmed earlier gains and ended nearly flat Wednesday as investors waited for the US Fed to conclude its policy meeting.
The benchmark Nikkei 225 index edged up 0.1pc to 27,346.88, while the broader Topix index slipped 0.2pc to 1,972.23.
Adani Group stocks resumed their selloff after the share sale by the Indian conglomerate's flagship firm failed to turn sentiment from Hindenburg Research's fraud allegations.
In one bright spot for the group, nearly all dollar bonds issued by Adani companies extended gains into a second day.
The rupee was marginally stronger and the Nifty 50 stock index climbed as the government prepares to unveil its budget later Wednesday.