UK house prices fell at the sharpest annual pace since 2009 after surging interest rates increased the cost of borrowing, one of the biggest mortgage lenders said.
The average cost of a home fell 3.1 per cent from a year ago in March, steeper than the 2.2 per cent drop expected by economists, Nationwide Building Society said Friday. Prices have fallen 4.6 per cent from their peak in August, bringing the average value to £257,122 (€318,320).
The figures add to evidence that the Bank of England’s rate increases are slowing a market that remained buoyant through the recession that accompanied the pandemic. The central bank raised its key rate to 4.25 per cent in a series of steps from near zero at the close of 2021 to control inflation.
“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation,” said Robert Gardner, Nationwide’s chief economist. “Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.”
Nationwide’s figures are more gloomy than some of the more forward-looking reports that have indicated some strength remains in the market.
Rightmove has said that asking prices for properties being put on the market are still rising, and surveyors who appraise houses are turning more optimistic. Mortgage approvals counted by the BOE also ticked up in February but remain below last year’s highs.
London prices sagged 4.1 per cent from a year ago to average £511,293. Prices fell more rapidly in East Anglia and Scotland.
It also was the seventh monthly decline, with prices dropping 0.8 per cent in the month of March alone, more than double the pace economists had expected.
“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-budget,” Gardner said. “Since then, activity has remained subdued.” -- Bloomberg
