UK house prices fall for longest period since 2009
© Reuters. FILE PHOTO: A combination of eight photos shows eight separate house doors in London, Britain January 19, 2017. REUTERS/Stefan Wermuth//File Photo
By David Millliken
LONDON (Reuters) – UK house prices fell 0.6 per cent more than expected in January and are now 3.2 per cent below their peak in August, after rising borrowing costs and pressure inflation is greater, the National Association of Mortgage Lenders said on Wednesday.
The January drop in home prices was the fourth straight drop – the longest streak since 2009 – and a drop twice the size expected in a Reuters poll of economists. , in addition to signs that the market is slowing down rapidly.
Prices in the three months to January fell 2.3% from the previous three months, the biggest drop since the three months to April 2009.
Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following the “small budget” of former chancellor Liz Truss, which sent market rates up leap.
“The market will find it difficult to regain much momentum in the near-term as economic headwinds remain strong, with real earnings likely to fall further and the labor market forecast to weaken as the economy suffers a downturn. shrinking,” said Nationwide chief economist Robert Gardeners.
Nationwide forecast in December that home prices will fall 5% by 2023.
Nationwide said home prices in January were 1.1 percent higher than a year earlier, the smallest annual gain since June 2020 and down from a 2.8 percent gain in December. Economists polled by Reuters had expected an increase of 1.9%.
Graphic: UK house prices fall the most since 2009- https://fingfx.thomsonreuters.com/gfx/mkt/akpeqmaqlpr/Pasted%20image%201675252228485.png
UK house prices increased by more than a quarter during the COVID-19 pandemic, fueled by extremely low interest rates, tax incentives and the need for more living space during lockdowns, which is also seen in other countries other West.
However, the boom has now gone in reverse, accelerated by loan disruptions since the small budget.
The Bank of England reported on Tuesday that the number of mortgages approved in December fell to its lowest level since the global financial crisis, excluding the start of the COVID-19 pandemic when there are strict restrictions on lockdown.
Gardner said this fall reflects a decline in post-small-budget mortgage applications and it’s too early to tell if homebuying volume will recover.
While lenders are now more willing to offer mortgages than just running on a small budget, the BoE has consistently raised interest rates and is expected to raise the main rate by half a percentage point to 4% next year. Thursday, the highest level since 2008.