UK house prices fell at their sharpest annual pace since 2009 after soaring mortgage rates curtailed how much buyers could afford, one of the nation’s biggest mortgage lenders said.
(Bloomberg) — UK house prices fell at their sharpest annual pace since 2009 after soaring mortgage rates curtailed how much buyers could afford, one of the nation’s biggest mortgage lenders said.
Halifax said the average value of a home fell 1.9% in August alone to £279,569 ($349,570), the sharpest monthly pace since November. It left prices 4.6% lower than a year ago when the value of UK property peaked.
The findings echo those of rival lender Nationwide Building Society, whose own survey last week showed prices falling 5.3% from their peak a year ago. Together, the reports indicate the market is now roughly half way through the 10% slump in prices that economists have forecast.
The Bank of England has raised interest rates 14 times since late 2021 tame inflation, and that’s straining the finances of consumers already hit with with higher food and energy bills.
“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts,” Kim Kinnaird, director at Halifax Mortgages, said in a statement Thursday.
It highlights a risk to Prime Minister Rishi Sunak’s government as it prepares for an election widely expected next year. Falling prices are unsettling property owners, who have grown accustom to steady increases over the past decade. Economists say the downturn is likely to intensify in the second half of this year.
“High mortgage rates will mean demand remains very weak while previously tight supply of second-hand homes on the market is easing,” said Imogen Pattison at Capital Economics. “We anticipate house prices to continue to drop until mid-2024.”
The latest decline interrupts a sharp surge in property prices that followed the Covid-19 pandemic, when buyers bid up the cost of bigger homes with outdoor space and room for an office. Kinnaird noted that even after the decline, the average price remains about £40,000, or about 17% higher than they were before the first lockdown.
The biggest drops were recorded in the South East of England, where prices fell 5% from a year ago. Nationwide, affordability levels now match June 2020 levels, though some of that will be offset by the higher cost of loans.
“House prices have proven more resilient than expected so far this year,” Kinnaird said. “There is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through.”
- UK House Prices Fall the Most in 14 Years, Nationwide Says
- UK Property Sellers Cut Asking Prices at Sharpest Pace This Year
- London House Prices Record the First Annual Drop Since 2019
(Updates with details from the report.)
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