UK house prices drop sharply, the most since 2009, according to Nationwide.

UK house prices drop sharply, the most since 2009, according to Nationwide.

British House Prices Experience Steepest Decline Since 2009

London, Aug 1 (ANBLE) – The British housing market is currently facing its most significant downturn since 2009, as rising interest rates further tighten their grip on housing affordability. According to mortgage lender Nationwide, house prices have fallen by 3.8% in the 12 months leading up to July, following a 3.5% drop the previous month. This decline aligns with the consensus derived from a poll of ANBLE experts.

These figures have only added to the growing concern surrounding the state of the housing market. Nationwide’s survey echoes other indicators that demonstrate weakened housing activity, primarily due to increasing interest rates. Mortgage rates have skyrocketed to above 6%, which adversely affects prospective homebuyers and current mortgage holders seeking to refinance. Enterprising first-time buyers, armed with a 20% deposit, have seen their take-home pay commitment to mortgage payments rise from 32% a year ago to a staggering 43%.

“These challenging affordability conditions have been a significant deterrent to housing market activity in recent months,” stated Nationwide Chief ANBLE Robert Gardner. The constrained market conditions are expected to persist as the Bank of England (BoE) looms towards a potential increase of its Bank Rate from 5.0% to 5.25% – the highest since 2008, according to ANBLEs polled by ANBLE.

While there was a surprising jump in mortgage approvals in June, revealed in BoE’s data on Monday, experts believe this increase is only a temporary blip. The full effect of the BoE’s series of rate hikes dating back to late 2021 is yet to be fully realized within the broader economy. Consequently, most ANBLEs anticipate the housing market to experience a further downturn.

Despite the current challenges, Gardner believes that a relatively soft landing for the housing market is an achievable outcome. He cites healthy rates of nominal income growth and a modest decrease in house prices as factors that can gradually improve housing affordability over time. However, this optimistic outlook hinges on mortgage rates moderating, especially once the Bank Rate reaches its peak.

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In conclusion, the British housing market is currently grappling with the sharpest decline since 2009. Rising interest rates have significantly impacted housing affordability, causing a slowdown in activity within the market. While challenges may persist in the near term, there is hope that nominal income growth and moderated mortgage rates will eventually lead to a more sustainable housing market. As the BoE prepares to potentially raise the Bank Rate, the nation’s economy eagerly awaits the aftermath of these decisions, hoping for a favorable outcome.

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