UK House Prices Fall Most Since 2009

UK house prices declined at the fastest pace since mid-2009 amid rising interest rates and high inflation dampening housing affordability, the Nationwide Building Society reported Friday.

The annual fall in house prices deepened to 3.1 percent in March from 1.1 percent in February. This was the biggest annual decline since July 2009. Prices were forecast to drop 2.2 percent.

On a monthly basis, house prices slid 0.8 percent after a 0.5 percent drop in the previous month. Economists had forecast a 0.3 percent decrease.

This was the seventh consecutive monthly fall in house prices and the slump left house prices 4.6 percent below their August peak.

In the first quarter, house prices dropped 1.8 percent sequentially taking the annual fall to 1.0 percent.

Nationwide Chief Economist Robert Gardner said the UK housing market reached a turning point last year due to the financial market turbulence followed by the mini-Budget announcement. Since then, housing market activity remained subdued.

“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation,” Gardner added.

“With house prices still significantly overvalued in today’s higher mortgage rate environment, we suspect that most of the adjustment in prices is yet to come,” Capital Economics’ economist Andrew Wishart said.

The Bank of England has lifted the bank rate by 415 basis points in the current tightening cycle that began in December 2021 with an aim to bring inflation down to the 2 percent target.

However, official data released this week showed that mortgage approvals increased for the first time in six months in February. Mortgage approvals for house purchases increased to 43,500 from 39,600 in January.

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