UK house prices see the biggest fall since 2009

The UK’s housing market saw prices dip at their fastest annual decline in 14 years, Nationwide reports.

The data reveals an annual drop of 3.8%, marking the biggest fall since July 2009.

And prices fell by 0.2% between June and July.

Led by soaring mortgage interest rates, which reached their highest point in 15 years during the same month, lenders are also grappling with inflationary pressures and worries over further Bank of England rate rises.

Higher mortgage rates have hit affordability despite the average home price falling to £260,828 – that’s 4.5% below its peak last August.

‘UK interest rates have been volatile in recent months’

Nationwide’s chief economist, Robert Gardner, said: “Investors’ views about the likely path of UK interest rates have been volatile in recent months, with the projected Bank Rate peak fluctuating between 5% in mid-May and 6.5% in early July.

“There has been a slight tempering of expectations in recent weeks but longer-term interest rates, which underpin mortgage pricing, remain elevated.”

He added: “As a result, housing affordability remains stretched for those looking to buy a home with a mortgage.

“This challenging affordability picture helps to explain why housing market activity has been subdued in recent months.”

He said that completed housing transactions in June were 15% below those seen last year and are 10% below pre-pandemic levels.

‘Doesn’t ease fears of a crash’

James Briggs, the head of personal finance intermediary sales at Together, said: “While the continued downward spiral in house prices last month doesn’t ease fears of a crash – this scenario is still unlikely.

“BTL is also in an interesting space. Current BTL investors are having to carefully weigh up mortgage costs against achievable and affordable rent.

“And, as BTL landlords roll off fixed rate deals over the next 12 months, we may see investors releasing these properties to the market – offering even further opportunities for potential homeowners.”

Marc von Grundherr, a director of Benham and Reeves, said: “We’ve seen inflation ease in recent weeks, however, interest rates and the resulting cost of borrowing remain high, and this is continuing to dampen buyer appetites, which in turn is impacting house prices.

“While we don’t anticipate any notable correction on the horizon, we expect these lethargic market conditions to remain in the short-term, until such time the cost of climbing the ladder starts to reduce.”

‘Gloomy market outlook on the face of it’

The managing director of Barrows and Forrester, James Forrester, said: “A gloomy market outlook on the face of it, but rather than entering a deep freeze, it’s fair to say the market is thawing.

“Yes, affordability remains an issue, however, just this week we’ve seen a big spike in mortgage market activity, which suggests that an uplift in house prices is just around the corner.”

Jonathan Samuels, the chief executive of Octane Capital, said: “The current market outlook isn’t quite as turbulent as today’s house price figures may suggest and, in fact, we’ve seen a boost to market sentiment in the form of mortgage approval activity outperforming wider expectations.

“While this increase in buyer appetites will take some time to filter through to top line house price growth, it’s certainly an early sign that the worst is behind us.”

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