UK house prices contracted at the fastest annual pace since 2009 as the impact of higher interest rates hit the property market, according to data from building society Nationwide.
The average house price fell 5.3% in August compared with the same month last year, down from a 3.8% contraction in July and the sharpest fall since July 2009, the lender’s monthly house price index showed.
House prices were down 0.8% between July and August, taking the average property cost to £259,153, down from a recent peak of £274,000 in August last year.
Robert Gardner, Nationwide’s chief economist, said the “softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels”.
He pointed out “mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently”.
But he thinks a “relatively soft landing is still achievable, providing broader economic conditions evolve in line with our (and most other forecasters’) expectations”.
Gabriella Dickens at Pantheon Macroeconomics thinks house prices “will have to fall a little bit further to bring demand back in line with supply”.
“Admittedly, mortgage rates have started to tick down, but we doubt they will fall as far as they did this spring, given bank rate looks set to top out at 5.5%,” she said.