British house prices unexpectedly fell in August as buyers struggled to afford high valuations, mortgage lender Nationwide Building Society said on Monday.
Property prices slipped by 0.1% last month from July, Nationwide said, the third month-on-month fall since April when a tax break expired for buyers of many lower-value homes.
Compared with 12 months earlier, prices in August were up by 2.1%, the joint weakest rate of growth since June of last year.
Economists polled by Reuters had forecast a 0.2% monthly rise and a 2.8% annual increase.
Prices were rising by almost 5% in annual terms at the end of last year ahead of the end of the stamp duty land tax exemption.
“The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms,” Nationwide Chief Economist Robert Gardner said.
An average earner buying a typical first-time home with a 20% deposit currently faces a monthly mortgage payment equivalent to around 35% of take-home pay, well above the long run average of 30%, he said.
The Bank of England cut its benchmark interest rate to 4% from 4.25% on August 7 but it also signalled concern about inflation pressures in the economy that could slow the pace of further reductions in borrowing costs.
Last month, the Royal Institution of Chartered Surveyors said a recovery in the housing market had lost steam as some buyers worried about possible tax increases in finance minister Rachel Reeves’ next budget.
“The risk is that speculation over possible property tax rises in the autumn Budget, such as a mansion tax, hits buyer sentiment further in the coming months,” Ashley Webb, UK economist with consultancy Capital Economics, said.
($1 = 0.7572 pounds)
(Writing by William Schomberg)
