UK house prices fell last month at the fastest annual rate in 14 years, according to Nationwide.
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.”
