Average home prices fell 0.9% on the month, leaving them up 7.2% from a year earlier
U.K. house prices fell at their fastest rate since the early days of the pandemic in September, as the mortgage market seized up due to the chaos of Liz Truss’s premiership.
Average home prices fell 0.9% on the month, according to the index compiled by the lender Nationwide, leaving them up 7.2% from a year earlier. That’s the slowest rate of annual growth since April 2021.
The numbers reflect a miserable month for the mortgage market, in which lenders withdrew hundreds of product offerings as market interest rates skyrocketed in response to Truss’s ‘mini-budget’.
Truss’s Chancellor of the Exchequer, Kwasi Kwarteng, had proposed the biggest tax cuts in 50 years without offering any compensating mechanism for raising revenue but was forced to abandon the plans after markets judged them likely to make an already severe inflation problem worse.
The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates, said Nationwide chief economist Robert Gardner. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.
The market had already been showing signs of peaking even before Truss took office, with the highest inflation in over 30 years hitting household budgets increasingly hard. The Bank of England had already raised its key interest rate to its highest since the financial crisis of 2008 and is expected to raise it by another 75 basis points to 3.0% when its Monetary Policy Committee meets on Thursday.
Nationwide’s data brings the first hard evidence that U.K. house prices can’t withstand both the surge in mortgage rates and the squeeze on real disposable incomes, tweeted Samuel Tombs, U.K. analyst at Pantheon Macroeconomics.
