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Michael Brown

Acting Editor
Published: 01/11/2022

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House prices decline as borrowing becomes more expensive.

UK house prices have started to fall, according to two different house price indices from Nationwide BS and Zoopla.

Both indices collect and evaluate their data differently. Nationwide BS, a high street lender, bases its index on its own mortgage data from the approval stage. Zoopla, a real estate company, uses the listings it holds on the market.

For Nationwide BS, house prices fell by 0.9% month-on-month, the first fall in 15 consecutive months and the largest since June 2020.

“The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates,” said Robert Gardner, Chief Economist at Nationwide BS.

It is a statement which is backed by Moneyfacts data.  

Since the date of the fiscal announcement, the average two and five year fixed deals have risen by 1.73 and 1.57 percentage points respectively.

The last time either average rate was higher was in 2008, after the onset of the financial crisis.

“Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation,” added Gardener.

Fall in prices expected next year

Zoopla, meanwhile, agreed that “political and economic turmoil” had sent average mortgage rates upwards.

Today, the average two and five year rates still sit above 6%, and if they remain at this price then there will be double digit price falls.

But this would not be felt this year, with weaker demand taking several months to reflect in price. As such, a drop in average rates could have the opposite effect. 

“If mortgage rates fall back in the next quarter, the outlook for 2023 will be very different,” Richard Donnell, Research Director at Zoopla, still noted.

Currently, the estate agency expects a reversal in average mortgage rates to 4% by the end of next year. House prices, meanwhile, could drop by 5%.

“At present, we believe this is the most likely outcome accompanied by a decline in sales volumes over the year to one million,” the index predicted.

With this data in mind, if you’re still nervous about mortgage rates and how to minimise the effect on your budget read our latest story Concerned about mortgage rates? Here's what you can do.


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