Nationwide data shows that UK house prices are at their lowest level in 14 years, as mortgage costs continue to rise.
The Nationwide House Price Index showed that prices fell by 0.2 percent in July compared to the same period last year and 3.8 percent compared to the previous month. This was the biggest fall since 2009.
The average price of a UK home is now £260.828.
House Prices are under pressure due to lenders increasing mortgage costs as a result of the Bank of England continuing its interest rate increases.
Nationwide data shows that house prices in June were 3.5% lower than they were the same month last.
Robert Gardner, Nationwide’s Chief Economist, said that housing activity has slowed in recent months due to the “challenging” affordability of mortgages by prospective homebuyers.
According to the lender, there were 86,000 home sales in June. This is 15% lower than last year at this time and approximately 10% below pre-pandemic prices. The average home’s price is 4.5 percent below its peak in August 2022.
Gardner explained that the data released by the BoE Monday showed a slight increase in approvals of mortgages for June. This was due to activity which predated recent increases in interest rates on longer-term loans.
Imogen Pattison is an assistant economist with Capital Economics. She said that the drop in house prices was the “first sign” of the rise in mortgage rates from mid-May.
In recent months, mortgage rates have increased following successive rate increases by the BoE. The BoE raised its rate in June to 5% in an attempt to curb stubbornly high inflation.
Analysts and economists expect house prices to continue to fall in the next few months and mortgage rates to stay at their current level for another year.
Experts in the property sector were hopeful about a possible “soft landing”.
John Ennis of Chestertons estate agency said that the London property market remained stable despite fewer first time buyers. This was due to an increase in sales and cash purchases of properties valued at more than PS1mn.
Tom Bill, the head of UK residential market research at Knight Frank, stated that the property market has not “slammed the brakes”, despite higher borrowing costs affecting buyer sentiments and forcing them to adjust budgets.
He said that the demand for housing should be more resilient than anticipated between now and general elections, pointing out the “cushioning effects” of wage increases, savings lockdowns, lenders’ forbearance and the popularity in recent years of fixed-rate agreements.