Nationwide house price index October 23 - reaction

October saw an uptick in transactions, with purchase activity twice the level we experienced in September. That may explain this slightly surprising data, which few were expecting. Buyers are currently able to secure some good deals, with some punchy offers being accepted by under-pressure sellers. This will likely continue into the new year as more property comes to market all aiming to gain attention. Why wait in the hope prices will fall significantly? Sure, there will be small drops but nothing major, as demand is still eye-watering as renters are forced onto higher rents which they can’t afford, so naturally they do all they can to buy for themselves. Tomorrow's Bank of England base rate decision will also be key.

October was a strong month in terms of mortgages submitted following a quiet August and first half of September. But even though there are higher activity levels, the market is still very quiet in historical terms and there's certainly no rebound yet. As the Nationwide suggests, the base rate is not likely to decline significantly for some time due to inflation. However, as mortgage rates fall, we are now seeing more borrowers looking to jump to secure a new deal. First-time buyers are particularly active, as they are snapping up a bargain from financially distressed households having to sell. However, there still remains a real lack of the next time movers looking to move further up the housing ladder. For many households, the prospect of upsizing in the current climate, and with rates where they are, is simply not appealing.

The UK property market is once again showing its resilience based on this evidence. We experienced an unexpectedly high volume of enquiries in October, with most coming from first-time buyers. There's life in the market yet. In Leicester, and I'm sure many parts of the UK, people who have saved up for a deposit are opting to buy at current mortgage rates rather than wait for them to drop, with the catalyst being exceptionally high rents and the knowledge that now is about as good a buyers' market as you could get. This trend of first-time buyers driving activity in the market has been going on for a few months. But while first-time buyers are having a field day, buy-to-let activity has been almost non-existent. The impact of higher rates has hit many landlords for six.

Big questions remain as to how much further house prices will continue falling, but recent trends from both Nationwide and Halifax have certainly shown some mildly encouraging signs that the housing market correction may be close to the bottom. The fact that mortgage rates are also reducing on a weekly basis is starting to dissipate the affordability headwinds. With real wages also now trending positive, this should help to prop house prices up until demand returns in earnest.

October has seen plenty of positivity and enquiries, which may be feeding through into the surprise uptick in prices, but not much in the way of new mortgage applications. Sentiment has improved, but activity hasn't. While this data is without doubt a curveball, there are still numerous headwinds facing the property market. Many lenders are reporting low business levels and so are cutting fixed rates and, more importantly, their margins, in an attempt to secure their market share among what are very low levels of borrowing. The fixed rate war looks set to continue.

The housing market is currently in limbo, as would-be home buyers delay purchases in the belief that 2024 will bring both lower house prices and mortgage rates. I expect property values to fall a further 10% by the end of 2024, even if we avoid recession. Current prices are simply unsustainable.

In Scotland, October saw a definite increase in enquiries from first-time buyers but many of these are now looking more towards planting their mortgage seeds for 2024 rather than looking to buy before Christmas. In some instances, this is due to a belief, or hope, that prices and rates may reduce in the coming months but for the majority, it's simply a result of the usual seasonality where the dark nights tend to subdue activity and house-buying plans are put on hold at least until after the Hogmanay fireworks have exploded. Throughout October, closing dates have still been a frequent occurrence however, with some eye-watering percentages above home report valuations still often being achieved in the main hotspots of Glasgow and Edinburgh in particular. Buy to let remains as dead as the ghouls wandering the streets on Halloween, and overall the signs are that 2023 will finish with a whimper. However, sparks could well fly early in the 2024 in the Scottish housing market.