In recent months mortgage rates were still more than three times the record lows prevailing in 2021 in the wake of the pandemic
UK house prices have dropped 1.8% compared with this time last year, according to a monthly monitor by Nationwide, reflecting weak activity in the sector throughout the year.
Despite some favourable economic factors for consumers, like increases in income in cash terms, these were not sufficient to offset the impact of higher mortgage rates, which have been consistently hot as the BoE has tried to check inflation.
In recent months mortgage rates were still over three times the record lows in 2021 amid the pandemic.
A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take-home pay — well above the long run average of 30%, Nationwide said.
This has resulted in a decline in the number of transactions.
The region with the biggest pullback was East Anglia, which dropped 5.2% since last year, while Northern Ireland and Scotland were the only regions to see an average rise across 2023.
Across England overall, prices were 2.9% lower compared with Q4 2022, while Wales saw a 1.9% drop.
In terms of housing type, there were signs that more buyers were looking towards smaller, less expensive properties, with transaction volumes for flats holding up better, Nationwide said.
The total number of transactions has been running at 10% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (20%), reflecting the impact of higher borrowing costs, said Robert Gardner, Nationwide’s chief economist.
He added: On the flip side, the volume of cash transactions has continued to run above pre-Covid levels.
