Bigger-than-expected fall in house prices as rate hikes hit market
House prices fell by 5.3% in the year to August – a bigger-than-expected drop, according to Nationwide.
This means the typical home is now worth £14,600 less than 12 months ago – with an average property price of £259,153.
Nationwide’s chief economist, Robert Gardner, says the softening is “not surprising” – with interest rate hikes by the Bank of England sending mortgage payments higher.
Activity in the housing market is currently running well below pre-pandemic levels – with mortgage approvals about 20% below the 2019 average in recent months.
But Mr Gardner struck an upbeat note after Nationwide’s latest House Price Index was released – and said “a relatively soft landing is still achievable.”
He added: “In particular, unemployment is expected to remain low (below 5%) and the vast majority of existing borrowers should be able to weather the impact of higher borrowing costs, given the high proportion on fixed rates, and where affordability testing should ensure that those needing to refinance can afford the higher payments.”
And while activity may remain subdued in the near term, Mr Gardner believes a mix of income growth and lower house prices could improve affordability if mortgage rates cool.
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Andrew Wishart, senior property economist at Capital Economics, believes this “marks the start of a significant further drop in house prices”.
He believes that, by mid-2024, house prices will be 10.5% below their August 2022 peak – with mortgage rates set to remain between 5.5% and 6% for the next 12 months.
Analysis: For many, house prices can’t fall far enough
The UK housing market has long lost touch with reality – but the recent modest fall in prices, confirmed by the Nationwide house price index figures for August, does follow the logic of economic trends.
After 14 consecutive Bank of England increases pushed the base rate to 5.25% and many mortgages beyond 6%, it would have been a surprise had the housing market not been affected.
While prices have been falling the volume of completions has stalled too, reflecting perhaps that many potential movers are waiting to see where rates will peak before they take the plunge.
For those looking to sell or buy from an existing home the impact will be largely theoretical, with the cost of remortgaging and the swingeing impact of stamp duty far more consequential in decision making.
A drop of more than 5% will be most welcome to first-time buyers, but the benefit will likely be wiped out by the increased cost of the mortgage required to get on the ladder in the first place.
For millions, prices cannot fall far enough to make that first step realistic, the hike in borrowing costs compounding an affordability crisis that has seen the average house price balloon to eight times the average wage in two decades.
According to Nationwide, there was a 25% drop in first-time buyers in the first half of 2023 when compared with 2019.
“A first-time buyer earning the average wage and buying a typical first-time buyer property with a 20% deposit would now see their monthly mortgage payment absorb over 40% of their take-home pay (with a mortgage rate of 6%) – well above the long run average of 29%,” Mr Gardner added.
There has also been a shift in the types of properties being purchased – with a big decline in demand for detached houses as buyers look for smaller, less expensive places.
Additional housing bills are piling more misery on families at a time when the main measure of inflation is easing back from the highs of last winter, when unprecedented energy costs hit Western economies.
The evolving cost of living crisis has squeezed affordability and demand at estate agents – and the Bank wants a wider economic slowdown to help cool the pace of price rises.
Data released by the Bank earlier this week showed that mortgage approvals had dropped by almost 10% last month.
Separate figures from property website Zoopla suggested that the UK was on track for about one million house and flat sales by the end of this year – the lowest level since 2012.
Average rates for two and five-year fixed residential mortgages remain above 6%.
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Renters now in the majority in UK
Higher funding costs for lenders are down to expectations the Bank of England still has some way to go in its battle against inflation.
Financial markets currently expect the Bank’s rate to peak just shy of 6% early next year – from its current level of 5.25%.
Nationwide, like other mortgage lenders in the shifting rate environment, revealed on Thursday that it was reducing some fixed and tracker products by up to 0.15 percentage points from today.
UK
MasterChef’s Gregg Wallace steps down as Kirsty Wark among 13 who claim he made inappropriate sexual jokes
MasterChef host Gregg Wallace has stepped down over allegations he made a series of inappropriate sexual comments on a range of programmes over 17 years.
Broadcaster Kirsty Wark is among 13 people who have made claims, with Wallace being investigated by MasterChef’s production company Banijay UK.
In an interview with the BBC, the Newsnight presenter, who was a celebrity contestant on MasterChef in 2011, claimed Wallace used “sexualised language”.
“There were two occasions in particular where he used sexualised language in front of a number of people and it wasn’t as if it was anyone engaged with this,” Wark said.
“It was completely one-way traffic. I think people were uncomfortable and something that I really didn’t expect to happen.”
Sky News has contacted Wallace’s representative for comment.
Kirsty Wark. File pic: PA
‘Fully cooperating’
Banijay UK said the complaints were made to the BBC this week by “individuals in relation to historical allegations of misconduct while working with Gregg Wallace on one of our shows”.
The company said the 60-year-old, who has been a co-presenter and judge of the popular cooking show since 2005, was “committed to fully cooperating throughout the process”.
“Whilst these complainants have not raised the allegations directly with our show producers or parent company Banijay UK, we feel that it is appropriate to conduct an immediate, external review to fully and impartially investigate,” the company said.
“While this review is under way, Gregg Wallace will be stepping away from his role on MasterChef and is committed to fully co-operating throughout the process.
“Banijay UK’s duty of care to staff is always a priority and our expectations regarding behaviour are made clear to both cast and crew on all productions, with multiple ways of raising concerns, including anonymously, clearly promoted on set.
“Whilst these are historical allegations, incidences brought to our attention where these expectations are not met, are thoroughly investigated and addressed appropriately.”
A BBC spokesman said: “We take any issues that are raised with us seriously and we have robust processes in place to deal with them.
“We are always clear that any behaviour which falls below the standards expected by the BBC will not be tolerated.
“Where an individual is contracted directly by an external production company we share any complaints or concerns with that company and we will always support them when addressing them.”
Previous investigation
Last month, Wallace responded to reports that a previous BBC review had found he could continue working at the corporation following reports of an alleged incident in 2018 when he appeared on Impossible Celebrities.
Wallace said those claims had been investigated “promptly” at the time and said he had not said “anything sexual” while appearing on the game show more than half a decade ago.
In an Instagram post following an article in The Sun newspaper, he wrote: “The story that’s hitting the newspapers was investigated promptly when it happened six years ago by the BBC.
“And the outcome of that was that I hadn’t said anything sexual. I’ll need to repeat this again. I didn’t say anything sexual.”
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Alongside MasterChef, Wallace presented Inside The Factory for BBC Two from 2015.
Wallace and Anne-Marie Sterpini in 2014. Pic: PA
Wallace has featured on various BBC shows over the years, including Saturday Kitchen, Eat Well For Less, Supermarket Secrets, Celebrity MasterChef and MasterChef: The Professionals, as well as being a Strictly Come Dancing contestant in 2014.
He was made an MBE for services to food and charity last year.
Recorded episodes of MasterChef: The Professionals featuring Wallace will be transmitted as planned, the PA news agency understands.
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