According to Nationwide’s latest house price index, this was the tenth consecutive month of double digit rises but is the smallest annual rise since November last year.

On a monthly basis, prices increased by 0.8 per cent, which compares to 0.2 per cent in July and 1.9 per cent in the same period last year. The report said that this was the 13th successive monthly increase.

The report added that average house prices have risen by over £50,000 in the past two years.

Nationwide’s chief economist Robert Gardner said that there were signs the housing market was “losing some momentum” as surveyors had reported fewer new buyer enquiries in the past few months and the number of mortgage approvals had fallen below pre-pandemic levels.

He added: “However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm. We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set to remain in double digits into next year.

“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”

Rising energy cap means energy efficiency is key

Gardner added that the recent rise in the energy price cap, which comes into force from 1 October, would have a significant impact on less energy efficient properties.

He said, from October, properties with an Energy Performance Certificate (EPC) between A and C would see average bills rise by nearly £1,000 a year, while D-rated property bills would increase by £1,250 a year taking into account the £400 government discount.

Gardner added that the average increase was equivalent to a 1.36 per cent rise in interest rates, but this was around one per cent for A to C-rated properties, two per cent for an E-rated property and three per cent for an F or G-rated property.

He said: “With household budgets coming under substantial pressure, the government is likely to increase support. But, as well as addressing the rising cost of energy bills, improving the energy efficiency of the housing stock could play a crucial role.

“Incentivising improvement measures, such as loft and cavity wall insulation and solar PV installations, could help limit bill increases and assist the UK towards its carbon emissions targets.”

Mortgage rates on the rise

He also explained that mortgage rates were increasing, and while 85 per cent of mortgages were on fixed rates, those looking to refinance could see a “significant rise in borrowing costs”.

Gardner said that an average two-year fixed rate was two per cent high than those two years ago and five-year fixed rates were 1.5 per cent higher than five years ago.

House price growth expected to slow in winter

James Briggs, head of personal finance intermediary sales at specialist lender Together, said that while house prices had reported double digit annual growth, this “can’t continue for much longer” with a drop expected in the coming winter as inflation would cause fuels bills to spiral.

Briggs noted: “The threat of a recession is also likely to dampen consumer confidence. Pressure to secure a quick sale before the housing market cools may also be a factor, as sellers decrease prices to secure a buyer.

“While this may benefit first-time buyers who can take advantage of a price drop and secure a mortgage now, many homeowners who were looking to move and upgrade their homes may now want to stay put, as they focus on remortgaging or consolidating unsecured debts to avoid going into payment shock as interest rates and inflation continue to rise”.

Emma Cox, MD of real estate at Shawbrook, said house price growth had “remained remarkably robust” despite economic headwinds, but growing inflationary pressure and higher borrowing costs were now having a “bigger impact”.

She continued: “Prices are continuing to be buoyed by a lack of properties on the market. The sector remains in desperate need of an influx of affordable, energy efficient stock. The candidate who emerges as prime minister on Monday will need to put solutions in place to help alleviate challenges.”

However, she said that lenders “remain keen to support buyers and are competing to offer favourable rates and loan to values (LTV)”.

She added: “Shopping around and locking in a fixed rate now will be a key to protecting prospective buyers against any further interest rate rises.”