UK house prices fell 5.3% in August compared to the same month last year, the fastest annual fall in 14 years, according to In all the countries Construction company.
The lender said the fall, the biggest since July 2009, when the global economy was in the depths of the financial crisis, was due to soaring mortgage costs, which are putting off potential buyers. Average house prices are more than £14,500 lower than they were a year ago and mortgage approvals have fallen by a fifth compared to pre-pandemic levels.
Prices fell 0.8% in August compared to July, bringing the typical price of a UK house down to £259,153.
“The slowdown is not surprising given the extent to which borrowing costs have risen in recent months, which has resulted in property market activity well below pre-pandemic levels,” said Robert Gardner, Nationwide’s chief economist.
Mortgage rates have risen sharply in recent months in response to the Bank of England, which increased interest rates 14 times since December 2021, from 0.1% to 5.25%.
Nationwide said the number of completed house sales was down 20% in the first half compared to 2019 and around 40% down compared to 2021, when the UK experienced a boom in house sales due to factors such as low interest rates and the government’s implementation of a stamp duty holiday.
While the proportion of people buying cash has remained strong, the number of completions by those needing a mortgage has fallen.
“Completed movers with a mortgage in the first half of 2023 were 33% lower than 2019 levels, while the number of first-time buyers was around 25% lower,” Gardner said. “On the other hand, spot purchases increased by 2%. The relative weakness in mortgage activity reflects growing affordability pressures resulting from the sharp rise in mortgage rates since last fall.
Earlier this week, a report from property portal Zoopla predicted that the number of homes sold in the UK this year would fall to lowest level in over a decadewith the soaring cost of mortgages put off home buyers.
Sales of homes nearing completion are expected to fall 21% year-on-year to around 1 million in 2023, the lowest level since 2012.
“Continuously rising interest rates make affordability difficult for buyers trying to move, with many having no choice but to wait for rates to stabilize,” said Tomer Aboody , director of real estate lender MT Finance. “With better inflation news recently, it would help if the Bank of England postponed the next rate hike, giving the market some breathing room to adjust.”