UK house prices fall at the fastest pace in 14 years, says mortgage lender

HOUSE prices in the UK fell at the sharpest pace in 14 years in November after interest rates surged, reducing the affordability of properties, said mortgage lender Halifax.

The lender said that prices fell 2.3 per cent, in a third consecutive decline. A typical property in the UK now costs £285,579 (S$470,930), down from £292,406 in October.

The findings added to evidence that the UK’s housing market may be headed into a more protracted downturn. Nationwide Building Society, another mortgage lender, said last week that home prices fell 1.4 per cent in November. This represents the fastest drop since the global financial crisis, excluding the pandemic.

Kim Kinnaird, director at Halifax Mortgages, said: “Some potential home moves have been paused as homebuyers feel increased pressure on affordability. Industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.” 

House prices are now 4.7 per cent higher than a year ago, when the Bank of England started raising interest rates to choke off a jump in inflation. The central bank has signalled that it is likely to keep boosting rates, prompting investors to anticipate a half-point increase in the key rate to 3.5 per cent next week.

Mortgage rates soared above 6 per cent in the past few weeks, also the highest level since the global financial crisis. While they have ticked just below that level over the past few days, they remain substantially higher than the near-1 per cent deals that were available in 2021.

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For now, with 85 per cent of mortgage holders on fixed rates, households are largely protected from high borrowing costs. But for those who have to refinance in 2023, monthly payments are set to double.

Halifax said that the north-east of England continued to be the only exception to slowing price growth. There, annual growth edged up slightly in November to 10.5 per cent, from 10.4 per cent in the previous month.

London was the biggest laggard. Annual prices of homes in the capital rose just 5.2 per cent in November, down from 6.6 per cent in October.

Property search websites Zoopla and Rightmove reported that sellers were cutting asking prices to attract buyers across the country in recent weeks. The Office for Budget Responsibility expects a 9 per cent decline in house prices over the next two years. 

Weakening demand has rippled out into other parts of the property sector too, with UK construction activity hit hard in November. S&P Global’s index tracking output fell to its weakest in three months, and growth in construction activity was confined largely to the commercial segment. BLOOMBERG