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London house prices fall for first time in eight years

House prices in London are at £471,761 and negative for the first time in eights years with the weakest performance in the UK since 2005.

The latest data from Nationwide shows house prices falling in London by a modest -0.6% over twelve months to September with an average property value in the capital of £471,761.

This is the first time homeowners in London have experienced a reduction in house prices since 2009 compared to UK regions average values of £210,982 and growth up 2.0% annually.

This is welcome news for first time buyers struggling to save the large deposit and for home movers it would mean the gap between their current home and the next may requiring a smaller deposit.

For home movers, falling house prices gives you the opportunity to raise the necessary deposit as you may find the gap to your next home decreases and is more affordable.

Other regions with strong growth

The strongest performing UK region is the East Midlands with house prices up 5.1% year-on-year to £177,825 and this is the first time since 2002 to be in the top spot.

Homeowners in the South West have also seen a strong rise up 4.8% over the year with average property prices at £240,832.

For remortgage buyers the higher prices in these regions give them an opportunity to release capital which they can use to improve their home.

The following table from Nationwide shows average prices and annual change for the UK to September 2017.
Region Average price Annual change
East Midlands £177,825 5.1%
South West £240,832 4.8%
West Midlands £185,082 4.6%
Outer SE £277,519 3.9%
East Anglia £222,080 3.9%
North West £156,193 2.8%
Wales £149,970 2.6%
North £127,213 2.5%
Northern Ireland £133,659 2.4%
Outer Met £365,584 2.1%
Scotland £146,022 1.9%
Yorks and the Humber £151,482 0.4%
London £471,761 -0.6%
Mr Robert Gardner, Nationwide Chief Economist said, the number of housing transactions and mortgage approvals have increased in recent months with the lack of homes helping to support prices.

Low mortgage rates and high employment are supporting demand although this is offset by pressure on household incomes impacting confidence.

Buy-to-let investors can benefit from lower rates as they can remortgage to reduce the cost of interest repayments to lenders.

House price growth rates across the UK are converging with the South of England moderating and London has seen a particularly marked slowdown with prices falling, says Mr Gardner.

Threat of interest rate rise

The Bank of England’s Monetary Policy Committee (MPC) indicates the current improvements in the economy would see an interest rate rise in the next few months.

Economists and financial markets are expecting a 0.25% rise in interest rates to 0.5% in the MPC’s meeting in November.

Mr Gardner said, the impact of an interest rate rise would be smaller than in the past as in recent years 60% of mortgages advanced have been fixed rate and only 40% variable which would seen an increase in monthly repayments.

For the average mortgage a 0.25% rise in interest rates would see homeowners repayments rise by £15 to £665 per month which would not be welcomed for households that spend over 30% of their gross income on their mortgage, said Mr Gardner.

While house price growth in the South has slowed, the gap in cash between the South and North England remains exceptionally high at £171,000 which has doubled in the past decade.

This price gap allows the older equity release buyer in the South of England to access wealth in their property using a lifetime mortgage to repay an interest only mortgage or pay for care at home.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or you are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt, for home improvements or holidays.

Learn more by using the property value tracker chart, mortgage costs calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.

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