Will chaotic aftermath of the mini-budget be repeated following the Autumn Statement?

Myron Jobson, interactive investor's senior personal finance analyst, comments on the latest ONS house price index as the property market hits a tipping point.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Official data and various other house price indices suggest the property market hit a tipping point in September as rampant inflation and rising mortgage rates wreaked havoc on buyers’ purchasing power.

“The latest ONS data shows that while house prices rose 9.5% over the year, they remained unchanged between August and September, while more recent data on the property market covering the month October from Nationwide, Halifax and Rightmove point to a month-on-month fall in prices.

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“It is becoming abundantly clear that more and more buyers simply can’t make the numbers work in the face of red-hot inflation, with the rising cost of necessities like food and household energy hindering deposit building efforts. Rising mortgage rates is also a blocker, made worse in September by the ill-fated mini-budget, which triggered a steep rise in borrowing costs – the full impact of which may have not yet filtered through to house prices.

“Buyers will hope the chaotic aftermath of the short-lived mini-budget will not be repeated following the Autumn Budget. Many will be waiting with bated breath for any surprises or help in tomorrow’s fiscal event.

“Interestingly, while tracker mortgage rates have increased with the rate rise, average fixed-rate deals have moved in the opposite direction. This is because fixed-rate deals aren’t as sensitive to base rate rises as variable rate loans, while other factors such as money market swap rates and gilt yields play a significant role in the pricing of fixed-rate mortgages. However, as inflation remains in double digits at 11.1% stringent affordability requirements are unlikely to waver.”

“The era of soaring housing prices stimulated by cheap borrowing costs and stamp duty holidays is seemingly coming to an end, and with the UK set to enter a lengthy recession, the housing market slowdown could accelerate.”