The building society’s house price index shows that the annual rate of house price growth remained negative at -3.8%, down from -3.5% in June. July saw house prices fall 0.2% month-on-month.
The price fall indicates the fastest drop since 2009 as rising interest rates put the brakes on the housing market.
According to Nationwide’s figures, the cost of a typical home is now £260,828, down from £262,239 in June. The price of a typical home is now 4.5% below the August 2022 peak of £273,751.
The Bank of England has raised interest rates 13 times since December 2021 in an attempt to curb soaring inflation. Rates are expected to rise again this Thursday, from 5% to 5.25%. Higher interest rates impact buyers’ ability to buy a home with a mortgage.
Nationwide’s chief economist Robert Gardner said:
“Investors’ views about the likely path of UK interest rates have been volatile in recent months, with the projected bank rate peak fluctuating between 5% in mid-May and 6.5% in early July. There has been a slight tempering of expectations in recent weeks but longer-term interest rates, which underpin mortgage pricing, remain elevated.
As a result, housing affordability remains stretched for those looking to buy a home with a mortgage. For example, a prospective buyer, earning the average wage and looking to buy the typical first-time buyer property with a 20% deposit, would see monthly mortgage payments account for 43% of their take home pay (assuming a 6% mortgage rate). This is up from 32% a year ago and well above the long-run average of 29%. Moreover, deposit requirements continue to present a high hurdle – with a 10% deposit equivalent to 55% of gross annual average income.”
