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UK house prices fall by most since 2009, higher rates to bite-Nationwide
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LONDON (Reuters) -British house prices fell by the most since 2009 in the 12 months to May and the country’s housing market faces further headwinds after a recent jump in borrowing costs, mortgage lender Nationwide said on Thursday.
LONDON (Reuters) -British house prices fell by the most since 2009 in the 12 months to May and the country’s housing market faces further headwinds after a recent jump in borrowing costs, mortgage lender Nationwide said on Thursday.
Compared with May last year, the average house price was down 3.4% after a 2.7% annual fall in April, Nationwide said.
That was the biggest year-on-year drop since 2009, during the global financial crisis.
House prices edged down by 0.1% in May from April after a monthly 0.4% rise in April, Nationwide said.
The housing market showed signs of recovery in early 2023 after a jump in mortgage rates at the end of last year triggered by former Prime Minister Liz Truss’s “mini-budget” plans for tax cuts which sent financial markets into turmoil.
However, stronger-than-expected inflation figures published last week caused a fresh rise in bond yields as investors priced in further Bank of England interest rate increases, prompting some lenders to rein in or reprice mortgage offers.
“Headwinds to the housing market look set to strengthen in the near term,” Robert Gardner, Nationwide’s chief economist, said, citing the risk that the jump in borrowing costs and mortgage rates could be sustained.
“Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape,” Gardner said.
Martin Beck, an economist with the EY Item Club, a forecasting group, said the 4% fall in house prices from last August’s peak was modest compared with the 7% rise in house prices over the past two years.
But 2.5 million owner-occupiers have yet to see their fixed-rate deals go up over the remainder of 2023 and the BoE is likely to carry on raising borrowing costs, meaning house prices would drift down further, Beck said.
Analysts at Capital Economics said prices would fall another 8% while Pantheon Macroeconomics said they would drop 4%.
(Reporting by William SchombergEditing by Muvija M, Paul Sandle and Christina Fincher)
The housing market refers to the supply and demand for residential properties, including homes for sale and rent. It is influenced by factors such as interest rates, economic conditions, and consumer confidence.
Interest rates are the cost of borrowing money, expressed as a percentage of the loan amount. They influence economic activity, affecting consumer spending and investment decisions.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
A mortgage is a loan specifically used to purchase real estate, where the property serves as collateral. Borrowers repay the loan over time, typically with interest.
A financial crisis is a situation where financial assets suddenly lose a large part of their nominal value, often leading to widespread economic disruption and loss of confidence in financial institutions.
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