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| House prices fall at fastest pace in nearly 14 years, says Nationwide | |
| (32 minutes later) | |
| UK house prices fell at their fastest annual pace for nearly 14 years in May, the Nationwide has said. | UK house prices fell at their fastest annual pace for nearly 14 years in May, the Nationwide has said. |
| The building society said prices in the year to May fell by 3.4%, the biggest fall since July 2009. | The building society said prices in the year to May fell by 3.4%, the biggest fall since July 2009. |
| It also warned that more rises in mortgage interest rates could hit the housing market. | It also warned that more rises in mortgage interest rates could hit the housing market. |
| Mortgage rates have risen recently on expectations that the Bank of England will have to raise interest rates again because of stubbornly high inflation. | Mortgage rates have risen recently on expectations that the Bank of England will have to raise interest rates again because of stubbornly high inflation. |
| As a result, the Nationwide said "headwinds to the housing market look set to strengthen in the near term". | As a result, the Nationwide said "headwinds to the housing market look set to strengthen in the near term". |
| House prices edged down by 0.1% in May itself, the Nationwide said, and the average property price now stands at £260,736. | |
| Average prices are still 4% below their August 2022 peak, it added. | |
| A drop in house prices would generally be welcomed by potential first-time buyers, who have watched property values continue to climb in recent years, even during the pandemic. | |
| However, rising interest rates means that mortgage costs are now higher than many people looking to get on the housing ladder might have planned for. | |
| Official figures last week showed the UK inflation rate - which charts rising prices - slowed in April by less than expected to 8.7%. | Official figures last week showed the UK inflation rate - which charts rising prices - slowed in April by less than expected to 8.7%. |
| That led analysts to predict that the Bank of England will have to raise interest rates above their current level of 4.5% to as high as 5.5% to try to slow price rises. | That led analysts to predict that the Bank of England will have to raise interest rates above their current level of 4.5% to as high as 5.5% to try to slow price rises. |
| In the wake of the inflation data, a range of lenders increased their mortgage interest rates, with Nationwide making the most significant move with a rise of up to 0.45 percentage points. | In the wake of the inflation data, a range of lenders increased their mortgage interest rates, with Nationwide making the most significant move with a rise of up to 0.45 percentage points. |
| Figures released earlier this week also showed that nearly 10% of UK mortgage deals have been taken off the market since last week. | Figures released earlier this week also showed that nearly 10% of UK mortgage deals have been taken off the market since last week. |
| No-deposits and other new ways to get a mortgage | No-deposits and other new ways to get a mortgage |
| How much can a first-time home buyer borrow? | How much can a first-time home buyer borrow? |
| Nationwide noted that interest rates were also projected to remain higher for longer. | |
| "If maintained, this is likely to exert renewed upward pressure on mortgage rates," said Robert Gardner, Nationwide's chief economist. | "If maintained, this is likely to exert renewed upward pressure on mortgage rates," said Robert Gardner, Nationwide's chief economist. |
| However, he said that the building society was not expecting a dramatic downturn in the housing market, given that "labour market conditions remain solid and household balance sheets appear in relatively good shape". | However, he said that the building society was not expecting a dramatic downturn in the housing market, given that "labour market conditions remain solid and household balance sheets appear in relatively good shape". |
| "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." | "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." |
| Sarah Coles, head of personal finance at Hargreaves Lansdown, said the recent changes in mortgage costs and availability may well have brought confidence in the property market "crashing down". | |
| While she said we would not see a repeat of the turmoil seen in the wake of last year's mini budget, mortgage rates are likely to rise in "the immediate future". | |
| "We can expect this to filter through into less demand, lower sales, and weaker prices," she added. | |
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| Related Topics | Related Topics |
| Nationwide Building Society | Nationwide Building Society |
| Personal finance | Personal finance |
| Housing market | Housing market |
| UK economy | UK economy |