House prices across the UK are starting to fall, with prices down by 0.9% in October, showing signs the house market is starting to feel the effects of the rise in cost-of living.
This is the first-time house prices have seen a decline in 15 months and is the largest fall since June 2020, with annual house price growth also slowing.
The rise in mortgages and interest rates following the announcement of the doomed mini-budget is thought to be the cause of the sudden market disruptions, according to Nationwide.
Nationwide’s chief economist, Robert Gardener, told the BBC: ‘The market has undoubtedly been impacted by the turmoil following the mini-budget, which led to a sharp rise in market interest rates.
‘Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.’
However, the latest figures show approvals for house purchases dropped from 74,400 in August to 66,800 in September, showing mortgage approvals were dipping before the budget was announced.
Daniel Mahoney, UK Economist at Swedish bank Handelsbanken, said: ‘The drop in mortgage approvals is no surprise: we already knew that new buyer enquires fell in September and a typical 2 year fixed rate mortgage in October has reached around the 6% mark. A recent fall in interest rate expectations could ease rates somewhat in the future, but nonetheless it seems likely that rising interest rates could prompt fall in nominal UK house price growth in the coming 12 to 18 months.
‘The cautious behaviour of households and businesses is also hardly surprising when consumer confidence is registering lower than it did during the financial crisis, PMIs are indicating contraction in both the manufacturing and services sectors, and retail sales by volume have been on a downward trend since last year. It seems likely that the UK will be facing an upcoming recession.’
Photo by Daniel Abadia
Leave a Reply