House prices grew by 0.1 per cent in November, with the rate of growth slowing to 4.4 per cent from 4.6 per cent in October, and analysts pointed to market uncertainty and cautious buyers and sellers having a cooling effect on the sector.
“There are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs," said Nationwide's chief economist, Robert Gardner.
"Mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly. The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the quarters ahead, even if economic conditions weaken, as most forecasters expect."
Gardner added that fixed rate mortgages are as popular as ever, with over 90 per cent of new mortgages contracted on fixed rates over the past 12 months - which he said was probably driven by a "desire to lock in record low interest rates".
Uncertainty and caution
Market experts noted that the numbers lacked a certain sparkle.
"Uncertainty still plagues the market with buyers and sellers remaining cautious of what lies ahead," said Randeesh Sandhu, chief executive of Urban Exposure.
“While house prices growth is slowing, prices are still rising fuelled by the lack of supply."
Sandhu said that while it was positive that the government continues to support the sector, there was "little evidence of anything revolutionary in the Autumn Statement".
"Crucially there was no movement on stamp duty which has stifled buyer demand and prevented market flows," he added.
"While the government’s intention to stimulate the housing market is still there, it is no different from previous governments’ attempt to solve the housing crisis. As a result, it is unlikely that enough has been done to make any long term significant changes to solve the housing crisis. All eyes will be on the upcoming housing whitepaper to see if there is anything to be optimistic about in the detail.”
Samuel Tombs at Pantheon Macroeconomics said the index has flatlined over the past two months, and added that, because the Nationwide data is based on lenders' mortgage offers, "it should already have registered any boost to loan values from the fall in mortgage rates since the referendum".
"Looking ahead, the likely stagnation of households’ real incomes in 2017, after a three per cent or so year-over-year increase this year, will drain momentum from the market," he said.
"The financial policy committee’s loan-to-income ratio rule also increasingly is constraining a further increase in the average loan size, while the rise in swap rates back to pre-referendum levels suggests that the recent fall in mortgage rates will be reversed."
As a result, Tombs said, house prices are expected to rise by just two per cent next year.
"The numbers are not particularly exciting because they are showing a market which is slowing down prior to the Christmas period and although rather a little historic they reflect the struggle between those trying to take advantage of very low interest rates and softening house prices versus those showing caution in view of the economic and political uncertainty," said Jeremy Lead, former RICS chairman.
"The result is modest house price increases mainly because of the continuing shortage of supply. Once again we are finding that those who are prepared to recognise the new realism in the market for buying and selling are still getting on with transactions."