UK house prices have experienced their most significant annual decline in 14 years, with August seeing a 4.6% drop, the largest year-on-year decrease since 2009. This translates to an approximate £14,000 decrease in the average UK home price over the past year, bringing it to £279,569. While this is the lowest level since early 2022, it still represents a £40,000 increase from pre-pandemic prices.
The decline is attributed to both the seasonal summer slowdown and high mortgage costs, as the Bank of England has raised interest rates 14 times since December 2021. This has led to an average rate of around 6.67% on a two-year fixed rate mortgage.
Kim Kinnaird, director of Halifax Mortgages, explained that the traditional summer slowdown in house buying, combined with the rapid increase in mortgage rates over June and July, contributed to the slump. She anticipates that the market will continue to rebalance until it finds a state where buyers are comfortable with higher mortgage costs. Halifax predicts a further decline in property prices into the new year, a trend that may be beneficial for those looking to enter the property market.
Rising wages have increased the purchasing power of first-time buyers, partially offsetting the impact of higher mortgage costs. Governor of the Bank of England, Andrew Bailey, suggested that UK interest rates are approaching their peak, hinting that the cycle of rate hikes may soon conclude. Nevertheless, the Bank is expected to raise rates again in its next policy meeting on 21 September, by a quarter of a point to 5.5%.
Theguardian