interactive investor comments on the latest ONS House Price Index

Buyers increasingly pushed to the sidelines despite fall in annual house price inflation.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, say: “Home prices rose by 10.3% in the year to November 2022, down from 12.4% in October 2022. This clearly represents a slowdown — but prices are still high by historical standards and the double-digit growth in prices has pushed many would-be buyers to the sidelines.

• Invest with ii: Open a Stocks & Shares ISA | What is a Stocks & Shares ISA? | ISA Offers & Cashback

“Even though house price inflation has come down, it doesn’t mean that prices are falling. It just means that home prices aren’t rising as fast.

“Home prices have risen far more quickly than incomes, creating an affordability squeeze, and mortgage rates have risen to levels not seen since the financial crash. The likelihood of higher interest rates to combat high inflation means that affordability is likely to remain the top challenge for potential homebuyers– with fast-rising rents and the ongoing cost-of-living crisis scuppering deposit-building efforts.

“If you can’t make the numbers work, rather than stretching too much now, it might be more financially prudent to wait until they are a bit more comfortable financially to buy. But there are no guarantees, the affordability squeeze could become more acute before easing, and personal circumstances might require you to buy a home.

“The affordability crunch could mean that existing homeowners may wait to list their properties, since many have already locked in lower mortgage rates, creating little incentive to sell and buy again until rates are more attractive.”