The UK housing market remains on a downward path, with prices in June falling by 2.6%, confirming their fastest annual rate of decline since June 2011. The average house price stands at £285,932, about €334,120, as rising mortgage rates "hit the housing market", according to Halifax.
Kim Kinnaird, Halifax Mortgages director, said that "the housing market remains sensitive to borrowing costs' volatile nature". Prices have not fallen so sharply in 12 years. The last most notable fall was 1.1% in May last year.
Martin Beck, chief economic advisor at EY Item Club, said that "given the previous price hike and the headwinds facing the housing market, with rising mortgage rates and other financial pressures, house prices continue to show surprising resilience".
The Bank of England raised rates for the thirteenth consecutive time to 5%, its highest rate in 15 years. With persistent runaway inflation and rising wages, markets are pricing UK interest rates to reach 6.5 % by March 2024, pushing mortgage interest rates to their highest since the financial crisis.
Experts believe that reduced affordability and financing capacity will inevitably act as a brake on UK housing market demand. Kinnaird pointed out that while there was no direct effect when rates rose, many mortgagors with variable-rate loans or mixed mortgages will face an increase in their payments in the coming years.
The Halifax report also notes that used house prices fell by 3.5% year-on-year in June, their steepest decline since August 2009. Second-hand home sales have been driving the market since the pandemic. By contrast, new-build prices rose by 1.9% year-on-year.
By region, house prices in the West Midlands, Yorkshire, Humberside and Northern Ireland stagnated or increased slightly, while all other areas recorded falls. The sharpest decline was in the South of England (-3%), while in London, house prices fell by 2.6%, a drop not seen since October 2009, around £15,000 less (around €17,530 less).
Adam Smith, founder of Northampton-based Alfa Mortgages, added: "The immense pressure on people's finances will surely drive prices down over the next few months."
Article seen in (Financial Times)
