UK house prices: a concerning trend
UK House Prices Fall at Fastest Rate in 14 Years, Raising Concerns about Housing Affordability and the Impact of Rising Mortgage Rates.
Steven
Hey Stephany, did you see that UK house prices fell at the fastest rate in 14 years? It's pretty concerning.
Stephany
Yes, I did. It's definitely a worrying trend. According to Nationwide Building Society, property values declined by 3.8% annually in July, the weakest reading since 2009.
Steven
Exactly. And the average house price dropped by 0.2% month-on-month in July, reaching an average of £260,828. It's now 4.5% below the peak in August 2022.
Stephany
That's a significant decrease. Robert Gardner, Nationwide's chief economist, mentioned that housing affordability remains stretched due to rising interest rates. Monthly mortgage payments now account for 43% of a prospective buyer's take-home pay.
Steven
Yes, and that's up from 32% a year ago. It's definitely becoming more challenging for people to afford a mortgage. Gardner also mentioned that deposit requirements continue to present a high hurdle, with a 10% deposit equivalent to 55% of gross annual average income.
Stephany
I agree with Gardner's assessment. It's no wonder that housing market activity has been subdued recently. Completed housing transactions were 15% below last year's levels in June.
Steven
However, not everyone is predicting a significant decline in house prices. Peel Hunt analysts believe that prices will only "drift down gently" by a maximum of 15%. They argue that strong demand for properties to buy, especially from first-time buyers, will help prop up prices.
Stephany
That's an interesting perspective. But I think it's important to consider the impact of rising mortgage rates. Buyers are increasingly choosing fixed-rate deals to avoid future hikes in borrowing costs. Currently, 87% of UK mortgage debt is on fixed rates.
Steven
You make a valid point. It'll be interesting to see how the Bank of England's decision to potentially raise the base rate further will affect the housing market. Some lenders have already reduced their fixed-rate mortgage pricing, but there's still uncertainty.
Stephany
Absolutely. The situation is complex, and it's hard to predict the exact outcome. I think we'll have to keep an eye on the market and see how things unfold.
Steven
Agreed. It's definitely a topic worth following. Thanks for discussing this with me, Stephany.
Stephany
You're welcome, Steven. It was an interesting conversation. I have to go. I must attend a meeting. Let's catch up soon!
Steven
Sounds good. Take care, Stephany!