The British housing market has experienced its most significant annual price decline since 2009, driven by rising interest rates, according to a recent report by mortgage provider Nationwide. In this blog post, we’ll delve into the details of this market shift and its potential implications for homeowners and buyers. Headlines such as “Housing Market See Biggest Drop Since 2009” are not generally welcome news.
A Sharper Decline in House Prices:
In August, the average house price in the UK fell by 5.3% compared to the same period the previous year. This drop is a stark contrast to the 3.8% contraction observed in July. In fact, it’s the most substantial decline in house prices since July 2009, as revealed by the latest data.
Between July and August alone, house prices saw a 0.8% decrease, bringing the average property cost to £259,153. This is quite a drop from the peak of £274,000 recorded in August of the previous year. This has lead to reduced sales volumes and an increase in aborted purchases.
Impact of Rising Borrowing Costs:
Nationwide’s chief economist, Robert Gardner, points out that the surge in borrowing costs has significantly dampened activity in the housing market, causing it to operate well below pre-pandemic levels.
The Bank of England’s recent data highlights a nearly 10% drop in mortgage approvals between June and July. Additionally, it shows that the average mortgage rate has climbed to its highest point since 2008.
This increase in mortgage rates aligns with the Bank of England’s ongoing efforts to combat persistent high inflation. They’ve raised interest rates 14 consecutive times since November 2021, when rates were at a record low of 0.1%. Markets are anticipating another quarter-point rate hike at the central bank’s upcoming meeting this month.
What Lies Ahead:
Andrew Wishart, senior property economist at Capital Economics, predicts that with mortgage rates expected to remain between 5.5% and 6% for the next year and the availability of second-hand homes increasing, the August data may mark the beginning of a significant further decline in house prices.
However, Gardner from Nationwide remains cautiously optimistic. He believes that a “relatively soft landing” for the property market is still possible, primarily due to the expectation of low unemployment rates and a significant portion of borrowers locked into fixed-rate mortgages.
Housing Market See Biggest Drop Since 2009
The UK housing market is experiencing a substantial shift as rising interest rates put downward pressure on prices. While this presents challenges for sellers and homeowners, it may offer opportunities for prospective buyers. The future trajectory of the housing market will likely depend on various factors, including the Bank of England’s monetary policy decisions and the broader economic landscape. As always, it’s essential to stay informed and consider expert advice when navigating this evolving market.