House prices are falling at their fastest rate in more than a decade latest figures show today.
The average cost of a home in the UK dropped 1.1% last month, the biggest annual fall since November 2012 and the first year on year decline since June 2020 at the start of the pandemic, according to lender Nationwide.
They are now 3.7% below the peak reached last August immediately before Kwasi Kwarteng’s disastrous mini-Budget, which sent mortgage rates soaring. The monthly decline of 0.5% was the sixth on the trot leaving the average price of a home across the UK at £257,406.
The building society’s chief economist Robert Gardner said :“The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.
“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mort-gage rates remain significantly higher than the lows recorded in 2021. Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.
“It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.
“Indeed, despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage pay-ments remain well above the long run average as a share of take-home pay. In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the private rented sector, where rents have been rising strongly.
“However, conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will al-so support housing affordability, especially if mortgage rates edge lower in the coming months.”
Matt Thompson, head of sales at London agents Chestertons, says: “As the UK economy has shown signs of recovery, we are beginning to see more sellers wanting to capitalise on the positive market sentiment. In February, our branches registered a 2% increase in the number of properties being put up for sale compared to the same month last year.”
“Still, the capital continues to experience a chronic undersupply of suitable housing; particularly as demand has remained strong since the start of 2023 with more buyers booking in viewings. Simultaneously, the number of offers being withdrawn has decreased by 11% which indicates that there are fewer window shoppers and more serious buyers entering the market.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Average property prices fell in February as higher mortgage costs, along with the rising cost of living, have an inevitable impact on affordability.
“Swap rates, which underpin the pricing of fixed-rate mortgages and have been falling since the turmoil created by the mini-Budget in September,, have taken a turn and moved the other way in the past couple of weeks on the back of expectations of further base rate rises. Subsequently, several lenders who launched sub-4 per cent five-year fixed-rate mortgages have since increased these, with mortgage rates likely to be up and down in coming weeks.
“Borrowers should seek advice from a whole-of-market broker before either taking the plunge or holding off in the expectation that rates will come down further.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These comprehensive and widely respected figures reiterate continuing worries about interest rates and inflation, which are keeping prices in check.
However, the market is definitely not in free-fall. On the ground, we are seeing more listings and protracted sales so buyers have more choice, are taking longer and negotiating harder when making offers.”
