Pound 'to plummet' as house prices fall - prices fell at sharpest annual rate since 2009 last month
House prices 'fell at sharpest annual rate since 2009' last month
PA
Analysts have warned the pound will plummet amid rising unemployment and falling house prices today, after UK house prices fell in August at the sharpest annual rate seen in 14 years, an index suggests.
House prices fell by 5.3 per cent annually in August, Nationwide Building Society said, a further softening from a fall of 3.8 per cent in July.
It took the average property value to £259,153, marking the biggest annual percentage drop since July 2009.
According to the Telegraph, Nomura FX strategist Jordan Rochester told investors: “It’s rare to have GBP perform well, when its housing market is like this over the past 15 years…another reason why GBP could head towards 1.22.”
Nationwide’s chief economist said the softening 'is not surprising'
PA
In August 2023, property values fell by 0.8 per cent month-on-month, after taking account of seasonal effects.
Nationwide’s chief economist Robert Gardner said: “The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels.
“For example, mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently (we explore the evolving composition of transactions in more detail below).
“Nevertheless, a relatively soft landing is still achievable, providing broader economic conditions evolve in line with our (and most other forecasters’) expectations.”
He explained unemployment is expected to remain low at below five per cent, and the vast majority of existing borrowers “should be able to weather the impact of higher borrowing costs”.
Mr Gardner added: “While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once Bank Rate peaks.”
Myron Jobson, senior personal finance analyst at interactive investor, said it was “a case of different month, same headwinds” for the housing market.
He added: “The slide in prices looks set to continue as the affordability pressures pushing prices down show persist.
“Traditionally, the third quarter of the year, covering the summer months, builds on the forward momentum in the housing market established in springtime. However, activity has been subdued this year, resulting from high mortgage rates and broader cost of living pressures, including climbing rents, which have made it uneconomically for many to buy a home.
LATEST DEVELOPMENTS:
A personal finance expert said it was the 'case of different month, same headwinds' in the housing market
PA
“Many first-time buyers haven’t been able to make the numbers work, and there is also a sense that existing homeowners are delaying their ascension up the property ladder as not to give up the super low-rate mortgage they secured before rates skyrocketed.
“While any fall in prices is good news for house hunters, it might not be enough to meaningfully offset high mortgage rates.”
Mr Jobson said in the final quarter of the year, the decision for many people on whether or not to purchase a property would likely hinge on where mortgage rates land.
He said: “Inflation is still key to the direction of mortgage rates. Put simply, if inflation continues to move meaningfully lower, this takes the pressure off the Bank of England to continue raising interest rates, so mortgage rates could follow.
“All eyes are on Bank of England policymakers who are odds-on to press ahead with another interest rate hike. The messaging behind the action will be a crucial moment for the housing market.”
You may like
