UK house price inflation is now running at a modest 2.0 per cent but London's housing market has recorded its worst annual performance for 12 years according to the Nationwide.
The building society's chief economist Robert Gardner says that despite this, housing market activity - as measured by the number of housing transactions and mortgage approvals - has strengthened a little in recent months although it remains relatively subdued by historic standards.
“House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country. London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6 per cent. Consequently, London was the weakest performing region for the first time since 2005" he says.
Looking ahead to a possible interest rate rise - tipped for this month or next by many housing economists - Gardner says the proportion of borrowers directly impacted will be smaller than in the past because in recent years the vast majority of new mortgages have been extended on fixed interest rates.
“The share of outstanding mortgages on variable interest rates (and which are therefore likely to see an increase in payments if Bank Rate is increased) has fallen to its lowest level on record, at about 40 per cent, down from a peak of 70 per cent in 2001" he says.
“Moreover, a 0.25 per cent increase in rates is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an increase of 0.25 per cent would increase monthly payments by £15 to £665 (equivalent to £180 per year)" he adds.
Commenting on Nationwide's latest figures for the UK market, Jeremy Leaf - north London estate agent and a former RICS residential chairman - says: ‘These figures underline what we shouldn’t do - in other words, judge what is happening in the property market by one piece of data. It shows the north-south divide in reverse and confirms what we have been seeing on the ground, that the London market is struggling for mainly affordability reasons and it is only those sellers who recognise the changed market conditions that are doing deals."