(qlmbusinessnews.com Mon, 2nd Oct, 2023) London, UK —
UK house prices have witnessed a year-on-year decline of 5.3%, with decreases observed in every region, according to Nationwide. The largest British building society attributes this decline to high-interest rates, which are impacting the market. Nationwide's house price index reveals that prices, adjusted for seasonal factors, remained flat in September after an 0.8% drop in August. In September, the average home price stood at £257,808, marking a £14,500 drop compared to the previous year.
The slowdown in the UK housing market can be attributed to the Bank of England's sharp interest rate hikes, aimed at tackling rising inflation brought on by pandemic disruptions and the energy price surge following Russia's Ukraine invasion. Although the Bank's monetary policy committee decided not to raise rates in September for the first time in almost two years, the effects of previous rate hikes continue to influence the housing market.
Only 45,400 mortgages for house purchases were approved in August, nearly 30% below the monthly average in 2019 before the pandemic. Nationwide's chief economist, Robert Gardner, explained that the housing market's subdued performance is due to reduced affordability. Higher mortgage rates mean that someone with an average income buying a typical first-time buyer home with a 20% deposit would spend 38% of their take-home pay on monthly mortgage payments, significantly above the long-term average of 29%.
Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, noted that higher mortgage rates have adversely affected affordability. However, he believes that increased consumer confidence could potentially boost demand in a few months. Gardner pointed out that the Bank's pause in rate hikes has helped lower long-term interest rates, potentially reducing mortgage costs. Nevertheless, a return to pre-pandemic record-low rates is unlikely, and the housing market is expected to remain somewhat subdued in the coming months.
During the third quarter of 2023, every region in the UK experienced price declines. The most significant drop was observed in the south-west of England, with prices falling by 6.3%, while six out of 13 regions saw declines of over 5%. The smallest drop occurred in Northern Ireland, down by 1.8%.
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