Friday 1 September 2023 at 07:19, United Kingdom
Home prices fell 5.3% in the year through August, a larger decline than expected, according to Nationwide.
This means the typical home is now worth £14,600 less than 12 months ago – with an average property price of £259,153.
Robert Gardner, chief economist at Nationwide, says the easing is “not surprising” – with interest rate hikes by the Bank of England pushing up mortgage repayments.
Activity in the housing market is currently running well below pre-pandemic levels – with mortgage approvals down about 20% from the 2019 average in recent months.
But Mr Gardner sounded an upbeat note after the release of the latest national house price index – and said “a relatively soft landing is still achievable”.
He added: “In particular, unemployment is expected to remain low (below 5%) and the vast majority of current borrowers should be able to withstand the impact of higher borrowing costs, given the high proportion of fixed rates, and where affordability should be tested.” . “Making sure those who need to refinance can afford higher payments.”
While activity may remain weak in the near term, Gardner believes a combination of income growth and lower house prices could improve affordability if mortgage rates fall.
The extra housing bills are adding to the misery for families at a time when the main measure of inflation is falling from the highs of last winter, when unprecedented energy costs hit Western economies.
An evolving cost of living crisis has squeezed affordability and demand for estate agents – and the bank wants a wider economic slowdown to help cool the pace of price rises.
Data released by the bank earlier this week showed that Mortgage approvals are down nearly 10% Last month.
Separate figures from real estate website Zoopla suggested the UK was also On track to sell about 1 million homes and apartments by the end of this year – Lowest level since 2012.
The decline in activity reflects not only the bank’s increase in the cost of borrowing, but also weak confidence in expectations.
Average interest rates on two- and five-year fixed residential mortgages remain above 6%.
The rise in funding costs for lenders is due to expectations that the Bank of England still has a long way to go in its battle against inflation.
Financial markets currently expect the interest rate to peak at 6% early next year – from its current level of 5.25%.
Nationwide, like other mortgage lenders in a variable interest rate environment, revealed on Thursday that it had reduced some fixed and tracked products by up to 0.15 percentage points from today.