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LONDON: British house prices fell by the most in more than 10 years last month, mortgage lender Nationwide said on Wednesday, adding to signs of a recession in the housing market due to high inflation and rising borrowing costs.
Nationwide said the 1.1% decline was the largest year-over-year decline since November 2012 and also the first annual decrease since June 2020, when prices fell 0.1% at the start of the coronavirus pandemic.
separate bank of england Data shows British lenders approved the lowest mortgages in January since 2009, not including the downturn at the start of the COVID-19 pandemic.
A Reuters poll published on Tuesday expects house prices to fall 2.4% in 2023, less than previously thought as a resilient job market and easing recession fears soften the blow of higher borrowing costs.
Nationwide said that compared to January, prices had declined 0.5% for the sixth consecutive month-on-month, the longest such period since the global financial crisis that began in 2007 and ended in 2009.
Economists polled by Reuters had expected prices to fall 0.9% from a year ago and 0.4% in monthly terms.
Nationwide said prices were now 3.7% lower than their highest in August last year.
Official interest rates have been rising steadily for more than a year and the mortgage market was hit hard in late September and October after former prime minister Liz Truss’ mini budget pushed up market borrowing costs.
Nationwide chief economist Robert Gardner said the market would struggle to recover in the near term given the risks of a recession, and that mortgage payments as a share of take-home pay were well above their average.
“However, the situation should gradually improve if inflation moderates as expected in the coming months, easing pressure on the domestic budget,” Gardner said.
“Solid gains in modest incomes combined with weak or declining home prices will also support housing affordability, especially if mortgage rates ease in the coming months.”
Nationwide forecast in December that home prices would decline by 5% in 2023.
Gabriella Dickens, an economist at the Pantheon macroeconomics consultancy, said she expects house prices to fall about 8% from last year’s highs.
“We are tentatively looking at a 5% increase in house prices for 2024, however, reflecting our view that the Monetary Policy Committee (of the Bank of England) will start reducing interest rates next year, ” He said.
Tuesday’s Bank of England data showed a jump in consumer credit, which rose by a net 1.6 billion pounds ($1.9 billion) in the month, more than double the increase forecast in a Reuters poll.
Lending was 7.5% higher than a year earlier, the biggest increase in three years, although this growth rate is not adjusted for consumer price inflation of more than 10%.
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