ALBAWABA – The United Kingdom’s (UK) mortgage lender Nationwide said on Friday that UK housing prices have fallen by the most since 2009 in the year to July, as reported by Reuters.
The fall in UK housing prices is likely caused by the skyrocketing interest rates in Britain the lender explained.
Compared with July 2022, the average house price was reportedly down by 3.8 percent after a 3.5 percent annual fall in June, Nationwide underlined.
The mortgage lender’s report was in line with the results of a recent economists’ poll by Reuters.
UK housing prices fell 0.2 percent month-on-month, the lender said.
Higher interest rates have pushed mortgage rates to above 6 percent for home buyers and mortgagors looking for refinancing options, Reuters reported.
Nationwide chief economist Robert Gardner said the typical first-time buyer with a deposit of 20 percent would see mortgage payments at current rates account for 43 percent of their take-home pay.
Take-home pay is the net amount paid after taxes and fees, and mortgage payments comprised only 32 percent of take-home pay a year ago.
"This challenging affordability picture helps to explain why housing market activity has been subdued in recent months," Gardner said.
The Bank of England looks on course to raise its Bank Rate to 5.25 percent from 5.0 percent on Thursday, according to economists polled by Reuters. This would mark the highest cost of borrowing in the UK since 2008.
BoE data on Monday showed a surprise jump in mortgage approvals in June, although most Reuters’ economists think a downturn in the housing market has further to run.
Notably, the bulk of the BoE's rate hikes since late 2021 are yet to feed into the economy.
Still, Gardner said a relatively soft landing for the housing market was achievable.
"While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time - especially if mortgage rates moderate once Bank Rate peaks," Gardner said.
