According to Nationwide, the UK’s property values fell at their quickest annual rate in July in 14 years.
The building society reported a 3.8% reduction in prices, the largest annual decline since July 2009.
According to Nationwide, housing affordability remains a barrier for homebuyers as mortgage interest rates remain high.
As lenders grappled with the uncertainties around the interest rate set by the Bank of England, mortgage rates rose to their highest point in 15 years in July.
According to Nationwide, the average price of a property in the UK is £260,828, which is nearly £13,000 less than the August 2016 peak.
The decline in housing costs, which have risen in recent years, notably during the Covid epidemic, should be welcomed by many first-time purchasers.
Even though mortgage rates rose in July, Nationwide said that house affordability was still strained.
Robert Gardner, the chief economist of Nationwide, estimated that a first-time buyer making the average salary and saving 20% for a down payment would have their take-home pay made up of 43% mortgage payments. Based on a mortgage with a 6% interest rate.
Just one year ago, these new homeowners would have paid slightly over a third of their gross income towards their mortgage.
The UK inflation rate slowed to 7.9% in June but food prices remain high.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the expected interest rates rise meant “we are not out of the woods just yet when it comes to rising mortgage costs. However, a few lenders, including HSBC, Barclays and Nationwide, have reduced their fixed-rate mortgage pricing on the back of better-than-expected inflation news.”
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said:
“We think that house prices will have to fall by about 8% from their peak before demand and supply come back into balance.”
