Residential property values have experienced their most significant yearly drop in 12 years, due to a mortgage crisis that’s deterring potential buyers.
Year-on-year, prices plummeted by 2.6% in June, a steep descent from May’s 1.1% decline, says Halifax, a mortgage lender. This marks the steepest downturn since June 2011.
On a monthly basis, June witnessed the third straight fall in prices by 0.1%, following a stagnant month in May. This brings the average home’s value down to £285,932.
The Bank of England has consecutively hiked interest rates 13 times, reaching 5%, which subsequently puts a strain on mortgage rates.
As of Thursday, the average expense for a two-year fixed mortgage agreement surged to 6.52%, according to Moneyfacts. Earlier this year, a standard five-year deal passed the 6% mark for the first time.
Kim Kinnaird, the Director of Halifax Mortgages, commented, “The real estate market remains susceptible to fluctuations in borrowing costs.”
She further noted, “The ensuing affordability crisis will inevitably serve as a deterrent to demand, with potential buyers reassessing what they can genuinely afford to bid.”
Mortgage brokers have responded pessimistically to the recent data from Halifax, forecasting a continued downward trend in prices this year.
Adam Smith, founder of Alfa Mortgages in Northampton, stated that the “considerable financial stress being placed on individuals will likely drive prices even lower in the coming months.”
Riz Malik, director of Southend-based mortgage broker firm R3 Mortgages, remarked, “If the current conditions persist, the only word that can depict the future of the UK economy, housing market, and mortgage sector is ‘catastrophic.'”
Kate Allen, founder of luxury rental firm Finest Stays in Devon, opined, “Although the decline in house prices in June was relatively slight, the direction is likely downwards, at least for the remainder of 2023. Much hinges on this month’s inflation figures, as core inflation remains stubbornly high.”
John Choong, market and equity analyst at InvestingReviews.co.uk, warned,
“With the average fixed mortgage rate solidly over 6%, the housing market should prepare for significant impact. This is particularly true for the South of England, which faces the most strain. Household incomes are shrinking monthly due to Andrew Bailey’s nonchalance and lack of competence.”
7:31 AM Gleeson, the house builder, experiences a fall in home sales While house prices may be declining, developer Gleeson has announced price increases. However, it did witness a 13% decrease in the number of homes sold in the year ending June.
The budget house builder completed 1,723 homes, a drop from 2,000 the previous year, with only 829 homes sold this year.
Nevertheless, the average sale price for homes throughout the year rose by 11.3% to £186,200.
