Nationwide reports that house prices in the UK fell last month for the first time in over a decade. Nationwide claims that the turmoil caused by Truss’ mini-budget had impacted housing sales.
The mortgage lender reported that prices fell 0.9% in October, their first monthly decline in 15 months.
The monthly decline was the greatest since June 2020, when the Covid pandemic was at its peak.
Last month also saw a sharp slowdown in annual UK house price growth.
Robert Gardner, Nationwide’s chief economist, said that the market was undoubtedly affected by the turmoil surrounding the mini-budget. This led to a sharp increase in market interest rates,”
He added that “higher borrowing costs have contributed to stretched housing affordability at a time when household finances already are under pressure from high inflation.”
Lloyds predicts that house values will drop by 8% in the next year, drop in mortgage deals for first-time buyers
New highs for mortgage rates in the 14th year
Investors responded badly to the September plan revealed by Liz Truss, her chancellor Kwasi Kwarteng and her prime minister in September. They promised billions of dollars of tax cuts but did not explain how they would be paid.
In uncertain times, lenders have also stopped hundreds of mortgage products.
In October, the UK’s average house price was £268,282.
Nationwide stated that the annual increase in house prices has slowed to 7.2%, down from 9.5% in September. This suggests that the housing market will slow over the next few months.
These figures portray a picture showing “sharply decreasing demand”, according to Susannah Streeter of Hargreaves Lansdown, senior investment and market analyst.
“The Trust mini-budget disaster which saw bond markets go berserk and lenders dramatically pull down cheaper deals almost instantly has clearly had an impact on buyers’ confidence,” she stated.
Ms Streeter warned the market that the Bank of England will raise interest rates to reduce inflation.
She said that “Housing affordability has been stretched to such a thinly any elastic on the market looks about to snap”, especially since the Bank of England is intent on raising rates.
This is another sign that the UK housing market is changing.
It seems that the period of low mortgage interest rates and significant increases in house prices is now over.
The question of whether or not price rises to slow down, stall, or reverse is still up for debate.
Covid’s race for space seems to have been a long time ago.
Although first-time home buyers may be finally able to get the lower prices they desire, they now face the reality that their mortgage payments consume a larger portion of their income than expected. It is also another financial headache.
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