UK House prices plummet to 2009 lows, causing market shockwaves

According to Nationwide, UK house prices have recorded their most significant annual drop in nearly 14 years, with a rapid decline observed in May

The Building Society has revealed a 3.4% decrease in prices compared to the previous year (2022), marking the largest decline on record since July 2009.

What are the impacts of interest rate hikes on UK house prices?

The data reflects the consequences of the central bank’s substantial series of interest rate increases, which are now impacting the housing market. The Bank of England is raising borrowing costs in response to persistent inflation levels. Nationwide warns that further increases in mortgage interest rates could have adverse effects on the housing market.

Challenges for the UK housing market ahead

Due to persistently high inflation, mortgage rates have recently surged, driven by expectations of the Bank of England implementing further interest rate hikes. As a result, Nationwide believes that challenges for the UK housing market are likely to intensify in the near future.

House prices in May experienced a slight decline of 0.1%, bringing the average property price to £260,736.

Hope for first-time buyers as prices remain below peak

Average prices still remain 4% below their peak in August 2022, providing some relief for first-time buyers who have witnessed a consistent rise in home values despite the pandemic’s challenges.

Record-low mortgage borrowing and decline in approvals

Fresh data from the Bank of England reveals that mortgage borrowing reached its lowest point on record in April, excluding the period since the beginning of the Covid pandemic. Borrowers have repaid £1.4 billion more on their mortgages than the amount banks lent out.

In addition, the Bank reported a decrease in net mortgage approvals for house purchases, dropping from 51,500 in March to 48,700.

In response to the inflation data, various lenders, including Nationwide, have raised their mortgage interest rates. Additionally, recent figures indicate that almost 10% of UK mortgage deals have been withdrawn from the market.