Home prices are falling at their sharpest pace in 14 years as borrowing costs continue to rise tomorrow
Home prices are falling at their sharpest pace in 14 years as borrowing costs continue to rise tomorrow
- £10,400 has been wiped off the value of a typical home in the last 12 months
- The fall in house prices by 3.8 percent is the largest drop since 2009
House prices are falling at their sharpest pace in 14 years and borrowing costs will rise further tomorrow.
Real estate prices fell 3.8 percent last year in the biggest recession since July 2009, according to Nationwide Building Society.
In the last 12 months, nearly £10,400 has been wiped off the value of the typical home, which is now worth £260,828.
Rising mortgage rates have put a stranglehold on the real estate market, straining affordability for millions of homeowners.
But borrowers will face more mortgage woes as the Bank of England is expected to raise rates by another 0.25 percentage point at its policy meeting tomorrow.
Over the past 12 months, £10,400 has been wiped from the value of the typical home as rising mortgage rates have put the property market in a stranglehold
Former senior Bank of England official Alex Brazier warned yesterday that a recession may be necessary to reduce inflation.
“Inflation is now entrenched and so, to be fair, getting inflation to 2 percent – the bank’s target – is likely to entail a further slowdown or recession and higher unemployment,” he said.
He predicted interest rates would spike below 6 percent, meaning further rate hikes would be needed in the coming months to bring inflation back under control.
Inflation fell to 7.9 percent last month, but remains stubbornly high. Rising borrowing costs have already taken their toll on the housing market.
There are fears that another hike in the Bank’s base rate tomorrow could trigger further hikes in mortgage rates.
Mortgage rates have already moved higher this week, with the two-year average fixed rate reaching 6.85 percent yesterday, according to analyst Moneyfactscompare.
House price fall of 3.8% marks UK property market’s biggest downturn since 2009
As more homeowners move to higher mortgage rates, the gloom in the housing market is likely to accelerate, according to Alice Haine, an analyst with investment platform Bestinvest.
“No matter how well a borrower finds a deal in the current climate, anyone who refinances now will face significantly higher mortgage costs,” she said.
“The financial pressure will only increase, which will increase the downward pressure on real estate prices.”
Real estate values are expected to drop another 10 percent in the coming year as the rising cost of borrowing has priced buyers out of the market and reduced affordability.
Robert Gardner, chief economist at Nationwide, said a typical starter with a 20 percent down payment would now be forced to spend 43 percent of their take-home pay on their monthly payments, up from 32 percent a year ago.
“This challenging picture of affordability helps explain why activity in the housing market has been subdued in recent months,” he said.