House prices in the UK have experienced their biggest decline in 14 years, according to figures released by Nationwide Building Society. The average house price now stands at £259,153, a decrease of 5.3% compared to last year. This drop is the largest since July 2009 and leaves house prices £14,600 below their peak in August 2022.
Impact on the Market
The year-on-year figure in July saw a 3.8% decrease in house prices. This significant decline has had an impact on property transactions. Home-mover completions with a mortgage in the first half of this year were down by a third compared to 2019, while first-time buyer numbers were approximately 25% lower. Buy-to-let purchases involving a mortgage were also down by nearly 30%. However, cash purchases saw a slight increase of 2%.
Factors Contributing to the Decline
Nationwide has attributed these figures to the rise in borrowing costs enforced by Bank of England base rate hikes. Mortgage approvals have also been below average, with a decrease of one-fifth compared to 2019. However, Nationwide's chief economist, Robert Gardner, believes that most existing borrowers will be able to handle higher borrowing costs, as a significant portion of them are on fixed mortgage rates. He also suggests that higher wages should improve affordability and notes a trend of buyers looking for smaller, less expensive properties.
Experts in the industry have weighed in on the situation. Chris Druce, of estate agent Knight Frank, expresses the belief that "buyer confidence" will improve once the base rate stops rising. He highlights the "shock-absorber effect" of strong wage growth, lockdown savings, and longer mortgage terms as factors that will help maintain demand. Independent financial adviser David Stirling welcomes HSBC's introduction of a 40-year mortgage, as many borrowers are extending their mortgages to reduce costs. Christian Duncan, from the Manchester Mortgage Centre, states that first-time buyers are focusing on finding properties that align with their budgets and are cutting down on spending.
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