House prices fell by 5.3 percent last month compared to August 2022, the biggest annual decline since 2009, according to the Nationwide House Price Index.
Prices have fallen 0.8percent as the market grapples with 14 consecutive interest rate rises by the Bank of England to 5.5percent.
Robert Gardner, Nationwide’s chief economist said the fall was “not surprising” given the recent rise in mortgage interest rates.
He said: “This has resulted in activity in the housing market running well below pre-pandemic levels.
“For example, mortgage approvals have been around 20 percent below the 2019 average in recent months, and mortgage application data suggests the weakness has been maintained more recently.”
The data showed houses are around £14,600 cheaper, compared to August 2022. This represents a larger fall than the 3.8 percent annual drop that Nationwide reported in July.
Between July and August, the average house price has fallen by 0.8 percent or £1,675 on a seasonally adjusted basis, it said.
With the Bank of England likely to push ahead with its 15th interest rate rise at its meeting this month and the potential for more rate rises to come, the outlook for the property market “appears gloomy”, an expert suggests.
Mortgage approvals plunged almost 10 percent in July with net mortgage lending increasing by just £200 million on the previous month.
Alice Haine, personal finance analyst at Bestinvest said: “The weaker lending data will inevitably feed through to house prices, exacerbating the dampening effect high interest rates are already having on the property market.
“While a decline in housing transactions is technically positive news for the Bank of England, as it indicates its main monetary policy tool is having the desired effect of curbing expenditure, there will be no such relief for homeowners looking to sell.
“Deciding whether to push ahead and risk a lower sale price will depend on how urgently a homeowner needs to move. With more homeowners reticent to sell, lower stock levels mean high-quality houses in good areas can still command their asking price but in a falling market there are no guarantees.”
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Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group warned the latest data paints “a bleak picture” of the UK property market.
He continued: “One major concern is the nearly one million fixed-rate mortgages, including around 100,000 in London, that need refinancing before the end of the year. Homeowners will face substantial increases in repayments at a time when the cost-of-living crisis is already straining budgets.
“Despite the uncertainties and potential price declines, we see opportunities in the London property market. We are very optimistic about the market over the next year and see a clear buying opportunity.”
Emma Jones, managing director of Frodsham-based independent mortgage broker, When The Bank Says No commented on the data and said: “Higher mortgage rates are hitting the property market for six. The Nationwide August house price report shows the full impact of the new mortgage environment we’re in and it’s brutal.
“Borrowers now need to be savvy. If the past few months have taught us anything, it’s that rate offerings are not around for long so if you like the look of a deal today, ensure you secure the rate now rather than miss out.
“It is positive to see more and more rate reductions on a daily basis but we need to see lower 2-year deals as most borrowers don’t want to commit to five-year fixes at the moment, where most of the savings are.”
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