Average house prices in the UK fell 3.1 percent in the year to March, the biggest annual pace since 2009, after higher interest rates pushed up borrowing costs.
The British Building Society said; The average house price decreased in March by 3.1 percent compared to last year, and that real estate prices fell by 4.6 percent compared to the peak price period that it reached last August, adding that the average price of the property reached 257 thousand and 122 pounds sterling.
And UK house prices are still ahead of a correction, predicts Daniel Mahoney, British economist at Handelsbanken, after prices fell in March at the fastest rate since 2009.
Mahoney points out that as financial conditions tighten (UK interest rates have been raised 11 times in a row), prices may continue to fall.
The Halifax area house price index showed an unexpected jump in the February month, but the latest reading for March from Nationwide seems to confirm that this was just a blip.
In fact, the latest BoE Mortgage Approvals data, which is a forward-looking indicator, suggests that a correction in UK house prices still has some time to go.
While mortgage approvals rose in February, they only registered at 43,500, which is almost 40% down on the year.
Moreover, the tightening of financial conditions following the recent market turmoil is likely to reinforce the current downward trend in prices. The peak-to-bottom decline in UK house prices could end up in the order of 10%.
The bank, which raised official interest rates for the eleventh time in a row to 4.25% last week, said; The cost of servicing a mortgage is on the rise. The effective home loan rate – the interest paid by a new borrower – rose 0.36 percentage point to 4.28% last month.
“The latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past,” says Martin Beck, chief economic advisor at EY Item Club. He added that approvals are still well below the average of 62,677 recorded in 2022.
The Bank of England’s monthly money and credit report also showed that consumers are borrowing more to finance their spending. Consumer credit rose by £1.4bn in February (split almost equally between credit cards and other forms of borrowing).
