Prices had increased by 1.5 per cent in October, which helped drive the annual rate of growth to six per cent, up from 5.2 per cent in the year recorded last month, according to the Halifax house price index. The average price of a house is now £218,002.
Confidence in the UK housing market had already hit a three-year low in October as expectations of a fall in prices rose. Annual price growth has fallen from highs of 10 per cent in March as buyers rushed to avoid stamp duty changes.
The dramatic fall in the value of sterling after the vote to leave the European Union will likely reduce the purchasing power of UK consumers, although the effects have not yet been reported by official inflation figures, which recorded a drop in October to 0.9 per cent.
“Consumers’ purchasing power seems certain to be increasingly squeezed as inflation is lifted markedly by a substantially weakened pound and companies likely look to clamp down on pay as they strive to save costs in a more difficult environment,” said Howard Archer, chief UK and Europe economist for IHS Global Insight.
UK earnings growth is set to be “dreadful” in the next five years, according to the Institute for Fiscal Studies, which could drag further on house prices as demand softens.
“Heightened affordability pressures, resulting from a sustained period of house price growth in excess of earnings rises, appear to have dampened housing demand, contributing to the slowdown in house price inflation, said Martin Ellis, housing economist at Halifax.