The latest index from the Nationwide shows no change in house prices as demand remains subdued as a home purchase is less affordable.
After 15 consecutive months increases house prices were unchanged in October with the annual rate of growth reducing to 4.6% down from 5.3% the previous month, although this is still in line with the growth rates since early 2015.
For remortgage buyers higher prices give them an opportunity to release capital which they can use to improve their home.
With a slowdown in the supply of homes on the market and the number of transactions is 10% lower than the same period last year, the average value of a UK property is now slightly lower at £205,904.
Even so first time buyers and home movers may find buying less affordable as house price growth has exceeded wage growth.
Robert Gardner, Chief Economist at the Nationwide said the subdued market may reflect the after-effects of the introduction of stamp duty on second homes from April 2016.
Property is less affordable
House prices have been stable over the last eighteen months averaging 5% growth per year which is below the long-term UK trend.
Even so this growth rate exceeds average wage growth and over the past three years house prices are higher by 20% whereas wages have risen by only 6%, says Mr Gardner.
This has impacted affordability to buy a new home as a typical home costs six times earnings compared to 5.3 times earnings in 2013.
Over the same period the cost of mortgage repayments has reduced with the fall in interest rates reducing the impact on affordability for home buyers.
For home movers wanting to trade up to a larger property, the fall in mortgage rates helps to reduce the monthly repayments making it more affordable to move.
In terms of the typical mortgage payment as a proportion of average take home pay, this is at 30% which is unchanged over the period and in line with the long-term average.
For older homeowners the considerable value in their property allows the equity release buyer to access wealth using a lifetime mortgage and maintain their standard of living or for home improvements.
Significant regional differences
Affordability varies considerably in different regions and in London the cost of a typical mortgage as a share of take home pay is now above its 2007 peak and above the long run average.
All other regions are below the 2007 peak although Outer Metropolitan and Outer South East regions are above the long run average whereas the South East of England and East Anglia are at this level.
In comparison housing is far more affordable in northern England, Wales and Scotland, says Mr Gardner.
The house price index from the Halifax suggests prices are still rising in September with an increase of 1.4% although Martin Ellis, Halifax housing economist said house prices in the three months to October were largely unchanged.
Supply of properties remains historically low and combined with very low mortgage rates prices should be supported in the next few months.
Lower mortgage rates benefit buy-to-let investors as they can remortgage to reduce the cost of interest repayments to lenders.
What are your next steps?
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