UK House Price Inflation Weakens Amid Rising Interest Rates

UK house price inflation slowed markedly at the end of the year as the rising interest rates and high inflation started to dampen the affordability of home buyers, data from the mortgage lender Nationwide showed Friday.

House prices were 2.8 percent higher than in December 2021. This was slower than November’s 4.4 percent increase, but faster than economists’ forecast of 2.3 percent.

On a monthly basis, house prices dropped at a slower pace of 0.1 percent after a 1.4 percent decrease in November. This was the fourth consecutive fall, the worst run since 2008, leaving prices 2.5 percent lower than their August peak.

Nationwide Chief Economist Robert Gardner said the housing market is unlikely to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to ease further and the labor market to weaken as the economy shrinks.

In the fourth quarter, house price growth more than halved to 4.8 percent from 10.3 percent in the third quarter. On a quarterly basis, house prices decreased 1.8 percent.

All regions registered a slowdown in annual price growth in the December quarter. London remained the weakest performing English region, with annual prices rising only 4.1 percent.

The building society observed that the housing market remained buoyant in the first three quarters of this year despite weak consumer confidence.

Although a pickup in activity in the New Year is expected, it is set to remain tepid until the broader economic outlook improves, Gardner said.

Nationwide expects overall house prices to see a moderate 5.0 percent fall next year. In order to register a double-digit decline, as suggested by some forecasters, a sharp deterioration in the labor market or more elevated mortgage rates would probably be needed.

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